Global Family Business Survey Report 2019
The succession discussion is not a new one. But while succession is a “front of mind” issue for wealth creators, it is still not being dealt with.
Succession is confronting for many business owners and wealth creators. It raises a number of difficult issues for them and they don’t know where to start. It is a task that is often left for another day. The problem with leaving it for another day is that business health and family health are linked. If the succession process is not sorted then the business will suffer – and more importantly so will family relationships. The lack of focus on succession contributes to less than 30% of family owned businesses surviving into the third generation of family ownership.
Family succession is also not just the handover or sale of the family business to a family member. The business may be sold outside the family or retained in family ownership but managed and governed by non-family members. Under all permutations, the family needs to consider how to manage and oversee the family’s wealth to ensure that the next generation is ready to be the future custodians of the wealth and that both the wealth and family relationships continue to survive and thrive.
With the right guidance and support, intergenerational wealth management can be an empowering and satisfying process for families. Wealth creators gain comfort with the next generation’s readiness to step into their shoes and the next generation gain increased learning opportunities and the comfort that their voice is being heard. But a badly run succession process can be as damaging as not doing anything at all. Surrounding yourself with the right people who are experienced in helping families is crucial – the process is too important to leave to chance.
This report is a call to action for New Zealand family business owners to get started on their succession process.
Another key challenge facing family owned businesses is balancing long term success against short-term challenges. The world is changing at a rapid pace and the business environment is becoming increasingly complex due to factors such as increased regulation and fast-paced changes in technology and business models. Responding to these challenges may mean sacrificing some short-term profitability to ensure the long-term sustainability of the business. This can be difficult for family owned businesses where risk aversion increases with success. A “zoom out/zoom in” approach helps establish a better connection between long-term objectives and short-term demands.