Issues around succession planning make up four of the top ten worries keeping family business owners awake at night, according to research from Close Brothers Asset Management (CBAM), conducted by Family Business United.
The survey of family businesses found that management succession planning was a worry for 39% of business owners, while 35% cited engaging and developing the next generation as a concern. Ownership succession and developing responsible future owners was stated as a worry by more than a third (34%) of business owners. The same number also highlighted identifying and maintaining family values as an ongoing concern.
Understandably, the day to day running of the business came in as the top worry for family business owners, with 40% saying that continuing to develop and remain a profitable business was a key concern. Personal finances also stood out, with worries about planning for later life highlighted by 38% of owners.
Outside of family businesses’ immediate control, four in ten (39%) business owners said red tape, regulation and legislation was a worry.
The family business research follows last week's launch of the Family Business United and CBAM Family Business Road Trip 2016. The road trip runs for six weeks covering Yorkshire, the Lake District, the Midlands, London and East Anglia and celebrates some of the UK’s most successful family businesses.
Family businesses employ almost 12 million people and turn over an estimated £1.3 trillion each year, over a third of the turnover of the private sector.
Penny Lovell, head of private client services at Close Brothers Asset Management said: “UK SMEs (small and medium-sized enterprises) face a multitude of challenges and family-owned small businesses can have an especially hard time navigating regulation and adapting to changing policy while remaining loyal to their unique set of family values. Beyond that, all this must be done while running a profitable business.
“Succession planning is naturally a significant concern for family businesses and requires careful consideration. Not only must owners consider developing their replacement, and ensure family values are adhered to, they also must plan for their own retirement. Taking advice early and developing a personal financial plan is crucial to alleviating anxiety and meeting long-term goals.”
Chris Griffiths, new investments fund manager and succession expert at Finance Wales, said: “For a family run business passing on the baton on to the next generation can be an emotive subject, it can often be a balancing act between the vendor’s financial and personal succession goals and the aspirations of family members. Business owners should get advice early on and develop a long-term succession plan that they can build into the day-to-day running of the business. In finding a natural successor owners should try to consider a wide range of succession options first to help give them the greatest chance of success.”
Duncan Mactinosh, senior partner at Capital Law, said: "We all know the old saw; 'clogs to clogs in 3 generations...'. Business founders, more often than we might imagine, struggle with the fact that their natural heirs don’t have the skills, or the energy, to take their business on. Two answers to that conundrum often arise; both wrong. Firstly – do nothing, and hope that a miracle happens. Secondly, let them have a go, and hope that a miracle happens.
"The third answer can be the right one – find and work with a non executive director who can help build the skills, encourage the energy, and support the succession in a way that the parent cannot. It’s a special skill, but it’s out there, if you know where to look. And we do.”
Top ten worries keeping family business owners awake at night
- Continuing to develop and remain a profitable business
- Management succession planning
- Red tape, regulation and legislation
- Planning for later life
- Engaging and developing the next generation
- Ownership succession and developing responsible future owners
- Identifying and maintaining family values
- Extracting value from the business
- Developing effective marketing, social media and PR strategies