Taking advice early and developing a personal financial plan is crucial to meeting long term goals.
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. Perhaps no challenge has as much potential to exacerbate the special stresses – or, conversely, highlight the special advantages – of operating a family business.
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. According to research conducted by Family Business Unit, Issues around succession planning make up four of the top ten worries keeping family business owners awake at night
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 management 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 reasonable 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.
Red Tape, Regulation and Legislation
Outside of family businesses’ immediate control, four in ten business owners said red tape, regulation and legislation were worries. Family businesses employ almost 12 million people [ii] and turn over an estimated £1.3 trillion each year; over a third of the turnover of the private sector[iii]
Family Owned Small Businesses
UK Small and Medium-Sized Enterprises (SME’s) 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.