Family business: The next generation

Succession is another area where many family businesses need to pay more attention. Taylor cites the FBA’s recent survey, conducted by KPMG, where only 20 percent of respondents had a documented succession plan. She says the organisation hopes to change that by supporting the process in various ways.

“We work very strongly to help all family businesses look at children coming into the business as an opportunity rather than an obligation. There’s nothing worse than having someone there who doesn’t want to be there, it’s not good for the business and it’s not good for the individual,” she says. “We have training programs for incoming members of the family giving youngsters a chance to improve their skills because if the business doesn’t succeed, that child may be looking for a job in the open workforce.”

If families are unsure about the transition, she suggests importing an external adviser to look objectively at the management of the business. “We also argue strongly for the regent that if your son or daughter isn’t quite ready, have somebody manage the company until he or she has been groomed and is ready, willing and able,” she recommends.

Kras agrees, noting that timing the conversation is the hardest part. “It’s a tough topic to broach. It’s tough on the incumbent because they’re having fun and it’s tough for the successors to raise without upsetting the apple cart. Getting that conversation started at the right time is critical.

“There’s a common analogy of the relay race. The successor has to be fully up to speed, running at the same pace as the incumbent for the handover. You can’t hand over before this line, and if you do the handover after that you’ll be disqualified as well. It needs to fit into a logical sequence. The process takes time, it’s difficult if it’s rushed,” he says.

Family businesses also need to consider alternative succession methods and exit strategies, such as appointing non-family members to head the company or selling the business. The RMIT survey reports that more than half the respondents said they would sell if the price was right.

“That needs to be thought about clearly as that’ll impact on the family, employees, customers,” warns Kras. “The Government is concerned about rural areas where family businesses are often central to the community. If the sale or succession of those businesses isn’t handled well, what happens to that town? It could blow out into the rest of the economy.”

All the more reason to put family first, even in the business world.