About Family Business Succession
Studies have shown that more than 70% of the businesses fail to transition to the next generation. Succession planning is deliberately left unattended to, this explains the above scenario. The delicate nature of this issue has resulted to sibling rivalry, tax hurdles and political power plays. A previous preparation for the family business transition will ensure such issues are avoided. Family business succession failure is linked to may other reasons.
Fager and McKinney 2007 explain that family business transition planning is ignored due to a couple of reasons. Firstly, is the good times high. When things are going well, it is normal for people to ignore the hard experiences. It is easier to maintain a business’s success when one is still in charge than after they are gone.
The business experiences problems like theft by employees, a broken plant and mistakes in accounting. These problems must be resolved. 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 still want to hold on to their businesses. Entrepreneurs usually feel they have accomplished a lot when they still hold on to their bisinesses. The time and sweat that was invested in the business makes the entrepreneur feel like they should still hold on to the 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. People tend to lack faith in the successor and this is one of the reasons why succession planning is neglected. The business can get a good successor who can move the business to greater heights. Even though the above is possible, people tend to have worries about the successor. This is one of the reasons why people ignore succession planning because this scenario is not pleasant. Business succession failure is as a result of lack of succession planning. Such issues should not be neglected in the short term otherwise the consequences will be more in the long term.