About Family Business Succession
Research has proven that over 70% of the businesses do not get handed over to the next generation. This is as a result of lack or ignorance of planning for the succession. It has become a very sensitive issue that has caused sibling rivalry, political power plays and tax hurdles. A previous preparation for the family business transition will ensure such issues are avoided. Despite this, there are many other reasons that lead to family business succession failure.
According to Fager and McKinney’s 2007 family business planning book the main reasons for neglecting family business transition planning are categorised severally. Getting used to the good times is one of the reasons. Good times make people not to pay attention to the difficult and trying times. The business’s success can be easily maintained when a person is still managing it not after they have gone.
The business experiences problems like theft by employees, a broken plant and mistakes in accounting. These problems need to be tackled. The company will have minimal chances of being successful as the long term ramification of not planning succession. The other category is immortality complex. The meaning of this is that many do not like to face the reality of death or sickness. Successful business people get influenced by the immortality complex. Family and employee disagreements ate the other reason why people avoid planning for business transition.
When the family members involve their emotions or political views, the business will not be handled properly as it should. These issues make people to even fear planning for the future events. There are those who are not ready to let go of their businesses. Entrepreneurs usually feel they have accomplished a lot when they still hold on to their bisinesses. All the time and effort put to make the business grow can make the entrepreneur feel like they cannot leave their business. People also ask themselves who will manage the business if they have left.
It is hard to understand tax hurdles during the event of selling or transitioning the business to the incumbents. People usually stop paying attention to tax problems and they attend to other issues. The other factor that causes neglect of succession planning is lack of faith in the successor and this can make one doubt the business too. Despite this, the business may have a reputable successor who can make the business more successful. However, people normally tend to have uncertainties about the successor. People do not want to experience such situations so they neglect succession planning. The failure rate in business transition is linked to the ignorance of succession planning. The effects of not attending to these issues in the short term will escalate in the long term.