Wednesday, 16 May 2012

Transferring Management in the Family Owned Business


The family business is a vital force in the British economy. Most businesses are family owned or controlled. They range in size from the traditional small business to a third of the FTSE. It is estimated that family businesses generate about half of the country's Gross National Product and half of the total wages paid.
 The economy depends heavily on the continuity and success of the family business. It is unfortunate, even alarming, that such a vital force has such a poor survival rate. Less than one third of family businesses survive the transition from first to second generation ownership. Of those that do, about half do not survive the transition from second to third generation ownership.
 At any given time, most of British businesses are facing the transfer of ownership issue. Founders are trying to decide what to do with their businesses; however, the options are few. The following is a list of options to consider:
  
            -          Close the doors.

            -          Sell to an outsider or employee.

            -          Retain ownership but hire outside management.

            -          Retain family ownership and management control.

To be one of the few family businesses that survive transfer of ownership requires a good understanding of your business and your family. There are four basic reasons why family firms fail to transfer the business from generation to generation successfully:

            -          Lack of viability of the business.

            -          Lack of planning.

            -          Little desire on the owner's part to transfer the firm.

            -          Reluctance of offspring to join the firm.

These factors, alone or in combination, make transferring a family business difficult, if not impossible. The primary cause for failure, however, is the lack of planning. With the right plans in place, the business, in most cases, will remain healthy. There are four plans that make up the transition process. By implementing these plans, you will virtually ensure the successful transfer of your business within the family hierarchy.
...to be continued

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