• Service: Enterprise, Family business
  • Type: Business and industry issue
  • Date: 7/18/2013

Should every business have a ‘succession plan’ or a ‘plan for success’? 

With a growth in interest shown towards family business globally, there have been an increasing number of surveys looking at the attitudes towards, and current thinking surrounding family businesses.A common question in these surveys is, “Does your family business/board have a succession plan in place?”

This question reflects most consultants’ and advisers’ assumption that a definition of success for family businesses is having next generation management and control in place. So why is it that the responses to the question are often disappointing to family business consultants and advisers?

Planning for the long-term and succession

In Australia, the latest KPMG Family Business Australia survey suggested that in 2011, only 39% of respondents had a ‘succession’ plan. To my mind, this level of response suggests one of two things: that many businesses may not be planning, either for the long-term, or for succession.

As PwC’s 2012 global survey of private companies indicated, only 41% of participants intended to transfer the ownership and control of their business to the next generation. In my view, 39% of Australian family businesses having a succession plan in place does not reflect badly after all.

With so many competing demands on the next generation, it should not be surprising that despite an increase in awareness around best practice, the number of family businesses that are still successful under the third generation remains relatively low. If succession was a symbol of achievement for owners of family businesses, I would suspect that the number planning for that eventuality may be far higher.

A plan for future success

What I think may be a better indicator of success is the extent to which the planned outcomes or milestones are achieved over time. In which case, a better primary question may be, “Do we have a plan for our future success in place?

This may be a question not just for the owner of the business to address with business management, but also the family (or families) involved as stakeholders in the business. Having a framework act as an enabler for a family business to frame answers to these questions is not necessarily that easy.

A set of milestones as part of a robust business plan

It is also a matter of timing; I’m not sure that an entrepreneur of a fledgling business needs to ask themselves that question, rather they need a set of milestones as part of a robust business plan. I believe that for family businesses the answers to these questions start with an understanding of what they see as constituting ‘success’.

What represents “success” changes over time, and means something different for different people. If a family, as owners of a business, can agree collectively what it means, it is a great start to developing a plan for their business including its succession, or perhaps maximising its value on realisation.

Perhaps future surveys should ask, “Is your success plan for the future in place?”

Bill Noye

Bill Noye
Bill is a Partner at KPMG’s Private Enterprise division. He is a Fellow of the Institute of Chartered Accountants in Australia & Chairman of Family Business Services for KPMG Australia with 25 years’ experiences advising on Family Business issues.

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Family businesses have unique challenges that aren’t always shared by other companies. Our hub offers a place to connect and engage with KPMG advisers and peers to share experiences and conversations around articles relevant to your business. Topics like succession & next generation, governance, growth, assurance, exit strategies, wealth preservation and philanthropy are important for business families to manage effectively to remain competitive and leave a lasting legacy for generations to come.

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