Over the next decade, 1.5 million Australian business owners will be retiring. However, recent research shows that only 16% of Australian businesses are equipped with a succession plan.
Planning for succession can be a difficult conversation to have within a family business, however, according to Philip Pryor, it’s a vital one to have to ensure the business is sustainable in the long-term.
“It’s something they don’t often like thinking about, and they just want to focus on doing the business. And the family will be happy with the business. And so thinking about the potential of parents moving and dying is something they don’t talk about, or they don’t have the time.”
He says it can also help avoid intergenerational conflict. Some of the most common cases are when parents expect their children will take over the family business.
“Often there are a lot of unsaid expectations…if those expectations aren’t discussed, it can be a rude shock.”
“Good succession planning doesn’t have to create disputes; it can create challenging conversations, but that’s fine. Those are important conversations to be had.”
A lack of succession planning can create conflict between family members. This is when mediators such as Pryor are called in to facilitate conversations.
Pryor believes there are certain warning signs that come before fallout of a family business.
“When something keeps happening over and over again. So, the same issue keeps coming up, usually with a bit more vengeance each time. If you see that repeating pattern, get somebody in, because then it’s relatively easy to sort out.”
He also believes that if the family can’t separate business and the personal then it can create some issues as well.
“Which hat are you wearing? Are you wearing your family member hat? Are you wearing your business person hat? It’s really important to separate that out. Cos you can’t live and breathe this business 24 hours a day, 7 days a week, years and years and years on end.”
Here are Pryor’s succession plan tips:
- Think long-term. Do you want the business to grow? Do you want to sell the business off? How do you plan on allocating business assets to the rest of the family?
- Define the business constitution. This ensures the business values are carried on from generation to generation.
- Have honest and transparent conversations with other family members, and make sure everyone is aware of their roles within the business.