Reasons Why Family Business Transition Planning is Important
Research has proven that over 70% of the businesses do not get handed over to the next generation. Succession planning is deliberately left unattended to, this explains the above scenario. It has become a very sensitive issue that has caused sibling rivalry, political power plays and tax hurdles. These issues can be prevented by planning for the succession. Family business succession failure is linked to may other reasons.
There are a number of categories that explain the reasons for neglecting family business transition according to Fager and McKinney 2007. Getting used to the good times is one of the reasons. Good times make people not to pay attention to the difficult and trying times. The business’s success can be easily maintained when a person is still managing it not after they have gone.
There are some difficulties that businesses face such as mistakes in accounting, a broken plant and theft by employees. These problems must be resolved. The company will have minimal chances of being successful as the long term ramification of not planning succession. The other succession planning failure is immortality complex. Death or sickness are the events that people do not want to be mindful of. Successful business people get influenced by the immortality complex. Family and employee disagreements ate the other reason why people avoid planning for business transition.
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 still want to hold on to their businesses. Entrepreneurs usually feel they have accomplished a lot when they still hold on to their bisinesses. Most entrepreneurs feel they cannot let go of their businesses because of the time and effort they put in. People also ask themselves who will manage the business if they have left.
Tax hurdles are complex and when the business is being sold or transitioned to the next generation. Tax issues are then ignored and more urgent issues are dealt with. People tend to lack faith in the successor and this is one of the reasons why succession planning is neglected. 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. Ignoring these issues will be comfortable on the short term, the long terms effects are adverse.