As of 2020, it’s estimated there are 4.8 million family businesses in the UK, contributing £575 billion to the UK economy. Most of these are very small, with 3 quarters being sole traders, and a further 21% having 1 – 9 employees. Speak to any family business going through a succession phase, they’ll tell you the hardest part is handing over leadership.
Existing business owners can often find it challenging to hand over the reins of the business to the next generation, especially if they are eager to bring in fresh ideas and technology! One side is trying to protect a legacy and the other is looking for opportunities to innovate. They key is to combine these two strengths.
When the knowledge and wisdom of the older generation meets the passion and creativity of the incoming one, wonderful things can happen. For that to happen you need a shared vision. Honest, open communication is essential to this happening.
Succession Planning in family businesses can be a complex undertaking, mainly down to the financial implications and possible issues with control. However, what is not discussed very often is managing leadership transition. Some of the mistakes that happen in these situations include:
- A dominant figure who wields too much power
Company founders can have a tendency to be a dominant force, especially in a small business. It can often help to ensure there are impartial, or outside influences within a small business - Family members placed in incorrect roles, or ones that are unsuited to them
Nepotism within small businesses isn’t always a negative, it can give family members the chance to make their mark in roles they otherwise wouldn’t be able to access, however it can also have the opposite affect. Again, this can often be solved by someone at board level with an impartial view - Lack of succession planning
Ensuring there is a sound and effective succession plan is key to any family business, even if this is to sell! - Inability to separate business and family dynamics
This can be the toughest part of running a family business and there is no easy solution. However it is important to remember that family businesses can be a source of great joy, as well possible conflict!
If you are interested in learning more about our Succession Planning service, please contact us.