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Survey: Only 23 percent of family businesses have succession plans

In a post earlier this week, our blog discussed some of the common causes of disagreements in family-run businesses and some relatively simple steps that can be taken to help avoid these often costly quarrels. In particular, we discussed how both business decisions -- particularly how they relate to growth -- and succession often emerge as major points of contention.

Interestingly enough, PricewaterhouseCoopers recently released a study focused on these very issues and it revealed that many family-run enterprises perhaps have their work cut out for them.

As part of the study, PwC polled 2,800 family-run businesses located in 50 countries with $100 million-plus in sales, including roughly 160 U.S.-based operations, on their plans for growing their business in the next five years.

Here, the researchers found the following:

  • 83 percent planned to achieve growth in existing markets
  • 43 percent planned to achieve growth in acquisitions
  • 41 percent planned to achieve growth in new sectors
  • 26 percent planned to achieve growth in new countries

These results would seem to suggest that while attitudes toward methods of achieving growth are evolving among family-run business owners, this evolution is nevertheless moving at a slow pace, meaning that the potential for disputes among family members regarding the pace and direction of growth is still very high.

The PwC researchers also found that a mere 23 percent of the family-businesses polled had a firm succession plan in place and, perhaps even more shocking, that 46 percent expressed reluctance at the prospect of passing the business to the next generation of family.

As for the reasons behind these findings, the researchers theorized that it could likely be attributed to more than just family dysfunction.

Indeed, they believe that many family-run business owners end up ignoring the otherwise vital issue of succession planning over fears that they will appear to exhibit favoritism toward a particular child or family member by appointing them to lead the business.

Similarly, they posit that it might have something to do with family-run business owners feeling guilt over their belief that the next generation of family is ill equipped to handle the business challenges of the developing market and that the organization would be better served in the hands of an outside individual with the proper skill set going forward.          

Perhaps more than anything, the findings of this study would seem to reinforce the notion that family-owned business owners must be willing to have difficult discussions and even take potentially difficult actions in order to ensure long-term success.

Consider speaking with a skilled legal professional to learn more about succession planning or other business law concerns.

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