About Family Business Succession
Studies have shown that more than 70% of the businesses fail to transition to the next generation. This is as a result of lack or ignorance of planning for the succession. The delicate nature of this issue has resulted to sibling rivalry, tax hurdles and political power plays. To avoid such occurrences, it is good to plan for the succession of the family business. Unfortunately, family business Succession fails because of many other reasons.
There are a number of categories that explain the reasons for neglecting family business transition according to Fager and McKinney 2007. The pleasant times high is the first one. When the times are good, people tend to ignore the difficult and hard 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. A solution needs to be found for such issues. The company will have minimal chances of being successful as the long term ramification of not planning succession. Immortality complex is the other reason. The meaning of this is that many do not like to face the reality of death or sickness. People who run their businesses are negatively affected by the immortality complex . People neglect planning for business transition earlier on because of employee and family feuds.
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. Most business people have achieved their dreams. All the time and effort put to make the business grow can make the entrepreneur feel like they cannot leave their business. Entrepreneurs also wonder who will run the business when they go.
Tax hurdles are complex and when the business is being sold or transitioned to the next generation. The tax problems are then swept under the rug so that more pressing issues are dealt with. Another thing that leads to the ignorance of succession planning is the wavering faith in the successor. 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. 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.