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Succession planning may be one of the most challenging experiences facing any leader, especially an entrepreneurial business person who has built a family business from scratch, so it is crucial to get it right. For a family business, transition is a once-in-a-lifetime decision.
Prosperity for generations to come
A good succession plan can be the first step in maintaining the strength of an enterprise and the family’s prosperity for generations to come. Discussing how a family business should continue beyond the career, or even the life, of the founder can be difficult, as it often crosses business and personal spheres. Issues around succession planning make up four of the top ten worries keeping family business owners awake at night, according to research from Close Brothers Asset Management (CBAM), conducted by Family Business United.
Second and third generations
The challenges faced by the second and third generations are substantially different from that faced by the first generation. Also, given that the first generation of business owners are often highly entrepreneurial, they may tend to overlook succession planning until the last moment. This makes the process even harder.
Maintaining family values
A survey of family businesses found that managing succession planning was a worry for 39% of business owners, while 35% cited engaging and developing the next generation as a concern. Ownership succession and developing responsible future owners were stated as worries by more than a third (34%) of business owners. The same number also highlighted identifying and maintaining family values as an ongoing concern.
Remaining a profitable business
The day-to-day running of the business came in as the top worry for family business owners, with 40% saying that continuing to develop and remain a profitable business was a key concern. Personal finances also stood out, with worries about planning for later life highlighted by 38% of owners.
Regulation and legislation worries
Outside of family businesses’ immediate control, four in ten (39%) business owners said red tape, regulation and legislation were of concern. Family businesses employ almost 12 million people  and turn over an estimated £1.3 trillion each year, over a third of the turnover of the private sector .
Family-owned small business
UK Small and Medium-sized Enterprises (SMEs) face a multitude of challenges, and family-owned small businesses can have an especially hard time navigating regulation and adapting to changing policy while remaining loyal to their unique set of family values. All this must be done in addition to running a profitable business.
Crucial to alleviating anxiety
Succession planning is naturally a significant concern for family businesses and requires careful consideration. Not only must owners consider developing their replacement and ensure family values are adhered to, but they must also plan for their own retirement. Taking advice early and developing a personal financial plan is crucial to alleviating anxiety and meeting long-term goals.
Top ten worries keeping family business owners awake at night:
- Continuing to develop and remain a profitable business
- Management succession planning
- Red tape, regulation and legislation
- Planning for later life
- Engaging and developing the next generation
- Ownership succession and developing responsible future owners
- Identifying and maintaining family values
- Extracting value from the business
- Developing effective marketing, social media and PR strategies
Handing a family business to the next generation is a major process, from selecting and developing the successors to protecting the brand reputation and retaining knowledge. However, the effort is crucial to develop a sustainable organisation for years to come. Please get in touch with Napthens’ Wealth Management to discuss your requirements.