INDUSTRY IN FOCUS
Keeping it in the family:
by: Andrew Ash – Director, Business Advisory, Mann Judd and Tom Roberts – Director, Business Advisory, Mann Judd
F
amily businesses account for 70% of all businesses in Australia and employ half of the country’s workforce. They form an integral part of the economy and many family business owners hope to pass their business onto the next generation. Despite this, research shows that only 40% of established family businesses survive the transition to the second generation. Past that point, 13% will survive to a third generation and only 3% to a fourth generation and beyond. A lot of family business owners really do go from shirt sleeves to shirt sleeves in three generations.
Why is that the case? It might surprise you to know that only one in four family businesses formally consider their approach to succession. It’s no wonder then that so many fail.
Why succession planning is difficult Succession can be an emotionally charged topic that is difficult for families to discuss. While it can be an awkward topic to bring up, the reality is that succession is one of the biggest risks to the ongoing viability of a family business. The proof is in the pudding. 24
Whatever the vision that you have for your business and your family, it’s important to know and understand if this vision is shared with your successors. So, what can be done about it? Unfortunately, there is no silver bullet when it comes to succession. Every family is different, and every transition is unique. However, by going through due process and tackling these issues head on, you can drastically increase the chance of a successful transition. By putting things on the table
ahead of time and creating transparency amongst the family, you can minimise potential conflict down the track. Once the issues are all out in the open, it can also help relieve a lot of the pressure that family members may be feeling. With that in mind, the best thing that can be done in terms of succession is actually getting started. This article outlines some practical tips for you to consider in planning your succession.
Start with the end in mind As a starting point you need to understand where you’re going. What does success look like for your family and your business? What is your timeframe for getting there? Who do you want to be your successors? What do you want for your family and your business? You may wish to transition the management and ownership to some or all your children over a specific period. You may wish to transition the management of the business to your employees, separating the running of the business from its owners. You may want to build some of your wealth outside your business for your family who is not involved in the running of the business. You may want to secure the future of the business to support your employees. Whatever the vision that you have for your business and your family, it’s important to know and understand if this vision is HIRE & RENTAL MAGAZINE MAY 2021
