Business Services

There are 6 key issues that cause problems to Family Business owners and sometimes leads to failures. Each of these requires proper understanding as they can be the key to a discussion with the proprietors of a Family Business. 

1. Professionalising Family Business Management:

• Why standards need improvement 
• Steps to be taken 

2. Funding Growth and Providing for Retirement 

• The problem 
• Alternate solutions 

3. Ownership Succession

• Why is this issue misunderstood by so many? 
• Suggestions to avoid future problems. 

4. Management succession 

• "Obvious" problems 
• "Not so obvious" problems 
• The answer 

5. Family Values Conflict with Commercial Decisions

• How does a Family Business think? 
• Where does it differ in commercial decision making? 

6. Lack of Appreciation of the Family Business 

• Why do families take it for granted? 
• How to overcome the problem 

How to achieve a "complete" a succession plan ?

Let's take a minute to recap on the major issues that face family business owners: 

• 83% of the Small Business Market if family oriented. 
• 70% of Family Business Owners are in the 1st Generation 
• Only 30% of Family Businesses are surviving to the 2nd Generation 
• 56% want the Family Business to remain in the family 
• 44% of the Family Business have no policy in relation to future ownership
• Only 18% of Family Business have a plan to buy out family members upon the death of the founder 
• Only 15% had "Some Plan" to buy out family members on retirement or resignation

It's been identified that six key issues cause FBO's problems and sometimes a failure.

They are: 

• Professionalising Family Business Management 
• Funding Growth and Providing for Retirement 
• Ownership Succession - Management Succession
• Family Values v Commercial Decisions 
• Lack of Appreciation of the Family Business

Succession Planning involves many diverse areas including, financial security, the transfer of wealth, retirement planning, future business strategies, contingency planning (in the event of Trauma or Disability) and how family values affect long-term personal goals. Most of all, it involves a planned decision making process by the business owner. 

He/she must consult with a range of advisers to achieve a "complete" succession plan. They are the Accountant, Solicitor and most importantly the Estate Planning Consultant.

It's only by working as a team that the complete succession plan can be devised and implemented. Achieving a "Complete Succession Plan" consists of 12 steps. 

So, what are the 12 STEPS to completing a Succession Plan ?

1. Assess whether the family can withstand the stresses that succession planning inevitably generates.
2. Owner Manager must actively manage development of a succession plan and the transition in leadership to the next generation. 
3. Consult and actively involve other major parties in the process eg Trust Advisers. 
4. Set up appropriate forums for reaching consensus on key issues. 
5. Develop a clear vision for the future of the business that all key family members can enthusiastically share. 
6. Choose a successor and other candidates for the future top management team and plan appropriate training courses. 
7. Help the successor build authority both in the family and in the business. 
8. Ensure all family members understand the rights and responsibilities that come with the roles they assume. 
9. Inform important parties, customers, suppliers and creditors - about the business's succession plan. 
10. Design and implement an appropriate retirement plan. 
11. Develop a contingency plan, just in case.
12. Design an estate plan that specifies how ownership of the business will eventually be distributed among members of the next generation. 

The following table graphically illustrates these three steps which are critical to achieving Complete Succession Planning. 

From a Business Owners viewpoint there are only three options available when considering the future of their business:

• Keep the business
• Sell the business
• Liquidate the business 

The fourth option is a cocktail of the above but is highly unlikely to occur. We know that over ½ of family business owners want to keep the business.