Overwhelmed by the Complexity of Businesses? This May Help
Why People Fail to Plan for Business Succession
Studies have shown that more than 70% of the businesses fail to transition 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. To avoid such occurrences, it is good to plan for the succession of the family business. Family business succession failure is linked to may other reasons.
According to Fager and McKinney’s 2007 family business planning book the main reasons for neglecting family business transition planning are categorised severally. Firstly, is the good times high. When the times are good, people tend to ignore the difficult and hard 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 need to be tackled. The company will have minimal chances of being successful as the long term ramification of not planning succession. Immortality complex is the other reason. This means that most business people do not want to come to terms with death or sickness. This negatively impacts successful entrepreneurs. Family and employee disagreements ate the other reason why people avoid planning for business transition.
Poor business management can result when the members of a family get emotional or political. These issues make people to even fear planning for the future events. There are those who still want to hold on to their businesses. Most entrepreneurs feel they have reached greater heights. The time and sweat that was invested in the business makes the entrepreneur feel like they should still hold on to the business. 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. The tax problems are then swept under the rug so that more pressing issues are dealt with. Another thing that leads to the ignorance of succession planning is the wavering faith in the successor. The business can get a good successor who can move the business to greater heights. However, people normally tend to have uncertainties about the successor. Succession planning is not done because people want to avoid such scenarios. Business succession failure is as a result of lack of succession planning. The effects of not attending to these issues in the short term will escalate in the long term.