Why People Fail to Plan for Business Succession
More than 70% of the businesses do not get transitioned to the next generation. This is as a result of lack or ignorance of planning for the succession. It has become a very sensitive issue that has caused sibling rivalry, political power plays and tax hurdles. These issues can be prevented by planning for the succession. Family business succession failure is linked to may other reasons.
According to Fager and McKinney’s 2007 family business planning book the main reasons for neglecting family business transition planning are categorised severally. Getting used to the good times is one of the reasons. When things are going well, it is normal for people to ignore the hard experiences. It is easier to maintain a business’s success when one is still in charge than after they are gone.
The business experiences problems like theft by employees, a broken plant and mistakes in accounting. These problems need to be tackled. The long term effects of not planning for succession will negatively impact the company’s chances of success. The other category is immortality complex. Death or sickness are the events that people do not want to be mindful of. Successful business people get influenced by the immortality complex. Family and employee disagreements ate the other reason why people avoid planning for business transition.
When the family members involve their emotions or political views, the business will not be handled properly as it should. Such events causes people to neglect planning for business succession. There are those who are not ready to let go of their businesses. Most business people have achieved their dreams. Most entrepreneurs feel they cannot let go of their businesses because of the time and effort they put in. People also ask themselves who will manage the business if they have left.
Tax hurdles can be difficult to understand when selling or handing over the business to the next generation. People usually stop paying attention to tax problems and they attend to other issues. People tend to lack faith in the successor and this is one of the reasons why succession planning is neglected. Despite this, the business may have a reputable successor who can make the business more successful. However, people normally tend to have uncertainties about the successor. People do not want to experience such situations so they neglect succession planning. When succession planning is not done, it is almost certain that the business handing over will fail. Ignoring these issues will be comfortable on the short term, the long terms effects are adverse.