The business of Business: How to fail by succeeding

A recent PIAA seminar for succession planning drew a sparse audience with ever sparser hair and an overdose of ageing process. The roomful of hopeful veterans to a man (gender correctness didn’t come into it) admitted that, when it came to a succession plan, they didn’t have one. Nor did they have much of an inkling as to go about accessing one. One suspects that some didn’t even know what one was.

Since in most cases the shop is family owned, the decision to pass on the reins is often a traumatic and emotional decision. As a result, planning for it is regularly designated to the too-hard basket. All kinds of conflicts come into the equation. One of the most frequent of these is the fear that the present owner’s hard work will be frittered away by the new people; more often it is reluctance to see new directions put in place which “the old man” doesn’t want to see applied to the company he nurtured for so many years.

Last year’s study by accounting firm KPMG revealed that, given the importance of succession planning, the practices of the average Australian family business suggest some cause for concern. While 60 per cent of respondents said they intend to retire during this decade, only 22 per cent had a formal succession plan.

Go elsewhere, young man/woman
While 70 per cent of respondents to the survey stated that they aim to pass on the business to the next generation, their succession practices suggest definitive failure to adequately plan for this eventuality.

The survey was undertaken in conjunction with Family Business Australia, an organisation devoted to the interests of family-owned enterprises. Addressing the question of succession planning, its CEO, Philippa Taylor, believes that, radical as it may seem, the succession plan should virtually begin when the business first opens its doors.

Another admonition from the Family Business organisation is that the next generation coming into the family business should work elsewhere for several years to ensure their business skills are honed away from the shadows of paternal management thinking. This is a generally agreed necessity, in that the experience they gain elsewhere helps to build self-confidence in their abilities and to develop reference points they can use to compare business practices.

A Canadian specialist on the subject, Barry McNulty, puts it in a nutshell: “For the most part, small business owners are too busy doing business, too busy taking care of crises, thinking about marketing and human resources, and the last thing they think of is themselves. Nothing they’ve done in life up to this point has prepared them for the next phase.”

There’s also a tendency to leap to a sudden decision, rather than doing the succession analysis that larger companies pay people to do. A small business owner needs to replicate what corporations have in-house, with a team of advisers: a lawyer, an accountant, a financial planner and a valuer who can accurately determine what a company is really worth. Financial background and such strategies as risk analysis are important components of the process.

Comment below to have your say on this story.

If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.  

Sign up to the Sprinter newsletter

Leave a comment:

Your email address will not be published. All fields are required

Advertisement

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.
Advertisement