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Nab Edens

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Published on: 14 Jun 2016 by nab-edens

Human Capital Alliance Inc, Thailand, Singapore: Win-win Family Business Successions

Human Capital Alliance managingdirector, Edwin Sim looks at successful family business transitions.

Beforebusinesses can be successfully transferred to the next generation, theappointed successors must fully understand all aspects of the business.

Theseaspects include day-to-day operations, company finances, long-termbusiness cycles, how to hire and manage employees and how to negotiaterelationships with partners and vendors.

At the sametime, the successors must also learn to find innovative ways to maintainprofitable growth in the face of competition and the ever-changing businessenvironment.

In herrecent article “Preparing for a family business transition,” KathyRichardson-Mauro said preparing family members for a business transition anddeveloping a solid succession plan are critical success elements.

 

Most family wealth from private business

Globally andespecially here in Thailand, most family wealth is created from privatebusiness enterprises. Many studies also show that many family business ownersare aging.

Richardson-Maurosaid a recent study showed that 51 percent of business owners intend totransition the ownership of their businesses during the next ten years, withabout half intending to sell their businesses to independent third parties; theother half intending to transfer the business to insiders, such as familymembers, employees or management.

 

Ensure anointed successors really want business

Often in multi-generationalfamily businesses, the owner assumes the next generation wants to take overthe business.

The ownermust ensure anointed successors really want to take over business and areadequately prepared in terms of knowledge and skills to manage the business.

 

Developing leadership skills well in-advance

If theultimate aim is to keep the business in the family, the owners must make surethey have developed their successors’ business and leadership skills wellin-advance of taking over the business.

“While aninternal transfer is typically less complicated from a business perspective, itmay be quite complicated from a personal/relationship perspective. “

Richardson-Maurosuggests that owners should have a succession plan in- place before approachingchildren or family members.

 

Most difficult owner challenges

Ownerscontemplating transitioning companies inevitably face several difficultchallenges including:

1.Decidingwho will succeed the current owner as President or CEO

2.Preservingand building the company’s value during the transition

3.Providinga smooth transition for owners, successors and key employees

 

Overcoming success impediments

The authorsuggests that owners should also closely follow several key elements to ensuresuccessful transitions including ensuring complete transparency during theprocess, developing strong family governance, and developing a strategicwritten succession plan.

Becausesuccession planning for small and family business transitions often involves ahuge amount emotional turmoil, it is often helpful to turn to an outside,impartial group of advisors to assist the navigation process.

 

Low-success rate

Statistically,the chance of a family business successfully transitioning from the firstgeneration to the second is about 30% and the odds get worse as you move tothird generation – less than 10%.

“Make surethat you give yourself and your successors enough time for the transitionprocess, and that you’re informed about all of the choices available so thatyou can make the best decisions for you, your family, and your business.”

 

Focusing on business

Althoughsuccession planning and choosing a successor for a family business can befraught with challenges, the author said the emotional aspects must be putaside in order to focus on the business.

“Having a sound succession plan in place can take the emotions out of the planning and help ease the transition for both the business owner and his or her successors.”

Large_human_capital_alliance_inc__thailand__singapore_win-win_family_business_successions_large

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