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Why do families in business fail to plan for succession?

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15 January 2012

Why do families in business fail to plan for succession?

Having just considered the question of why family businesses fail to plan for succession, as seen whilst on Linkedin, I had to add my thoughts. This was what I wrote... I certainly think there are a vast number of reasons for the lack of planning – and it's usually not as simple of just one clear reason:

* The unspoken assumptions meaning that the current generation believe that they have planned – such as thinking their oldest child will automatically take over despite their possible lack of skills and wishes to the contrary

* The lack of understanding and skills from current and next generation to look at succession * The fear of change and the future * Poor professional advisors not understanding family businesses and their complexity * The lack of skills and expertise in the next generation – no one to hand the business to within the family

* Failure to understand the business and marketplace as it is today and it’s needs * Arrogance * Failure to face up to the need to look outside of the family perhaps

* The need to control – and the inability to let go

* The founder/current generation’s own entrepreneurial spirit

* Tangled personal relationships and the fear of upsetting relatives – or even wanting to deliberately sabotage relationship

* Disagreement over it being just a lifestyle business to service the immediate family or if it will be a business that should grow, develop and invest I could go on and on …

within the FIB Community we see many more reasons than these often with a fair amount of deep rooted anxiety, frustration, bitterness and fear as well. The reasons are usually complex and involve not understanding the shape of the hole and what pegs are right to fit into that hole. The longer the process is left, the less choices and options are available. The best succession planning is when everyone is open and honest and can see clearly without emotion but that’s far easier said than done – having experienced it within my own family’s business and also observed in others. Facilitation can be critical to helping with this but only by people suitably trained and experienced to deal with family businesses. Of course once any planning is in place, it's amazing how many them then fail to have suitable share agreements etc exist to support it!