It is inevitable that family businesses valuing billions of dollars will change hands over the next decade as the baby boomer generation pass their businesses on. Many of those retiring currently have no succession strategy. To achieve the best possible outcome, owners need to understand the many complex family, individual and business issues that must be addressed in the succession process.To address the complex structures of family businesses, the findings of the research have been condensed into eight principles of succession which are intended to be a practical guide to how family businesses should view and conduct their succession process. Key findings from the research include:
Eight principles of succession
- Succession is not retirement – despite the misleading wording.
- Start with readiness
- Set your goals before the journey
- Price is not first
- Harmony is a must
- Plan early, start earlier
- Equality of not equal
- Ask before you get lost
What are the main triggers for a business to commence succession?
- 24% owner ready to step down
- 16% next generation ready to step up
- 15% health issues
- 10% taxation/estate planning
- 9% death in the family
- 27% other triggers (comprised of seven remaining triggers)
What were the most important considerations in the succession process?
- Family harmony
- Continuity of the business
- Ongoing jobs for my employees
What is happening with the business when succession is completed?
- 57% said the business will be kept in the family
- 27% said the business will be sold
- 16% are unsure what will happen
Where the business is retained, who will be the next CEO?
- 44% indicated it will be a family member
- 36% said a non-family member
- 20% are unsure
Creating, sustaining and enhancing harmony through the succession process is a must. In engaging with family and other persons involved in succession, business owners should recognise that those involved are seeking certainty about the process and about their future. They need to feel a sense of contribution and that there is a positive outcome where there are opportunities for individual growth.
Please see our Taxation page for further details. https://www.bjdennehy.ie/taxation/succession-retirement-planning/