How to manage a generational shift in the family business
5 tips to ease the transition in 2024
Family comes first – until succession goes sour. Prepare for the challenges and embrace the opportunities of handing on the business reins with professional advice.
Succession is a detailed and delicate challenge
There are over 1.4 million family businesses operating in Australia, and even the most steadfast founder must eventually pass the torch. With generational shifts inevitable, family businesses must prioritise succession planning.
If increasing costs and high inflation mean business is already doing it tough, managing a generational shift may add fuel to the fire. A successful transition, without sacrificing family harmony, requires thorough planning and support from unbiased professionals.
Potential roadblocks to a successful transition
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5 ways to ease the transition
Achieving a smooth transition requires considered planning, transparent communication and a united commitment to the business’s long-term success.
1. Plan ahead to avoid rushed decisions
Start the process well in advance – allowing time for careful contemplation, preparation and the development of a thorough succession plan. Early discussions about roles, expectations and future goals will aid a smooth transition.
2. Prioritise clear communication
Encourage family members to honestly express their thoughts, concerns and goals, and consider engaging an external advisor or mediator to guide these conversations.
3. No handshake deals
Don’t rely on familial goodwill – even the closest relationships can sour in the context of business and money. Ensure ownership and role transitions are documented with support from expert lawyers and accounting services.
4. Prepare for challenges
Consider how you will manage differing generational perspectives, business continuity risks, conflict and more – and engage business consultants or family business experts who can offer valuable insights from other successful transitions
5. Look for the innovation and growth opportunities
A generational shift presents a valuable opportunity to assess where a business is and where you want it to go.
Why accounting and financial management advice is a mustAn experienced family business accountant can provide advice on wealth management and tax planning to minimise the tax implications of your business transfer.They can also oversee the transfer of:
Succession planning is good time to consider other estate planning tasks such as:
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Why a successful generational shift matters
Business continuity
A generational shift is a time of upheaval for a family business. A smooth transition ensures survival by protecting jobs, preserving customer loyalty and prioritising stability.
Innovation and opportunity
Survival is one thing – creating long-term success is another. Smart family businesses seize a generational shift as an opportunity to leverage fresh ideas and perspectives to innovate and gain competitive advantage.
Family harmony
Blood is thicker than business – provided a transition goes smoothly. A well-managed generational shift can ensure family ties are not only maintained but strengthened by prioritising honesty, fairness and respect.
An enduring legacy
Family businesses often have a proud origin story, a rich history and a strong connection to community. A successful transition preserves this legacy for generations to come.
Family business success for future generations
The generational shift can be a daunting prospect with a huge amount at stake – business, family, wealth and longevity.
Prepare for the challenges and leverage the opportunities by engaging professional support to ensure careful planning, open communication, thorough documentation and successful execution.