Why People Fail to Plan for Business Succession
Studies have shown that more than 70% of the businesses fail to transition to the next generation. Succession planning is deliberately left unattended to, this explains the above scenario. The delicate nature of this issue has resulted to sibling rivalry, tax hurdles and political power plays. A previous preparation for the family business transition will ensure such issues are avoided. Unfortunately, family business Succession fails because of many 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. The pleasant times high is the first one. Good times make people not to pay attention to the difficult and trying times. 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 must be resolved. Not planning the business transition will decrease the chances of a business prospering in the long term. Immortality complex is the other reason. The meaning of this is that many do not like to face the reality of death or sickness. This negatively impacts successful entrepreneurs. Employee and family wrangles fears can make people avoid planning for succession.
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. Business people always wonder who will be in charge of the company if they left.
Tax hurdles are complex and when the business is being sold or transitioned to the next generation. The tax problems are then swept under the rug so that more pressing issues are dealt with. Another thing that leads to the ignorance of succession planning is the wavering faith in the successor. The business can experience more growth when it is run by a great successor. Despite the above, the successor is normally faced with skepticism. Succession planning is not done because people want to avoid such scenarios. Business succession failure is as a result of lack of succession planning. Ignoring these issues will be comfortable on the short term, the long terms effects are adverse.