Australia is on the verge of the greatest wealth transfer in our nation’s history as baby boomers pass their estates to their next generation.
The McCrindle research group estimates that more than $A3 Trillion will be transferred to heirs with some of that to include the value of family businesses.
Accepted statistics show that roughly 70 per cent of Australia’s 2 million businesses are family-owned. And they account for the jobs of about one-half of Australia’s workers.
But how will the changing of hands affect family businesses?
Family Business Australia predicts that more than half of the nation’s businesses will not survive a handing over to a new generation, which is clearly a concern for the economy and for governments.
There are myriad reasons for these failures.
And it has nothing to do with the size of the business – think about the difficult family transitions in huge companies over the years that have been fodder for TV series and books.
Family Business Australia says family issues are more to blame than business issues.
Some experienced business minds have excellent insights into successful transitions including:
- Treat the transition as an ongoing event – not as a single moment
- Ensure children go into the business by choice, not obligation, and that positions are earned on merit, not on family ties
- Be wary of the likely difference in strategic direction between different generations
- Consider the governance of the business – this is a structural backbone for any business
- Philanthropy is an important part of business because it teaches the next generation that the family business is about more than profits alone.
There is plenty of advice from those who have looked closely at family businesses. Family Business Australia has compiled this list for making a family business perform as well as possible:
12 Commandments for family business
- Leave work at work, and home at home.
- Communicate. Don’t avoid the bad news. Family members must be transparent about their intentions, motivations and reasons.
- Have clearly assigned roles for each family and non-family member in the business.
- Pay the market rate. Remunerate the job, not the person.
- Develop a succession plan before you need it. Ensure it is endorsed by all involved.
- Develop a robust management structure for both business and family governance.
- Prepare the next generation.
- Use external advisers; they can be an objective sounding board.
- Undertake professional development to build lasting support networks and better manage business ownership transition.
- Enhance your family business brand. Research shows consumers have more trust in family businesses, so make sure they know you are family owned.
- Build your online profile. Customers expect to be able to access your business around the clock.
- Make philanthropy part of your strategy. Not only can it make your business stand out in the community, it can strengthen the bond between generations and the legacy of family business values.
Thompson Partners is heavily geared towards working with family business. Your family matters. Contact us for assistance.