ADVOCATE COLUMN 2nd WEEK MAY 2018
Imagine you have built up a business over the course of your working life, you have taken risks, made sacrifices and had many sleepless nights building a brand and providing a product or service for the community in which you operate. Then the day comes when you are no longer able to continue in the business, the business closes it doors and no longer exists. You still live in the community and have to drive past your previous place of business, only to see nothing there for all your years of effort. How would you feel.
Given three quarters of all New Zealand businesses are considered to be family businesses and fewer than 15% of family firms survive under family control after the third generation, then the chances of the above happening are pretty good unless you have taken the time to start planning early as to what will happen when you are no longer able or interested in continuing to work.
An essential part of any business plan should be an exit strategy. What are you going to do when you no longer have the passion to do what you do now or changes in personal circumstance, force a change on you. If it is a family business then the ability of other family members to take over the business may be limited by their financial capacity. So advanced planning and open and frank conversations with all interested parties is also necessary
Families being families’, disputes will arise often in relation to remuneration, division of labour and performance. This why good governance is essential because it can provide the formal framework to develop and implement a strategy to ensure that the business that the family has worked so hard in for many years can continue to benefit the family, community and economy in which it is located long after you have moved on.
All this requires planning and it is never too early to start the process. If you know who your successor is to be, how do you ensure they have desire and skills for the undertaking. How will assets be transferred and when will you hand over control. Remember that you are not the only party involved, there will be the successor, staff, customers, suppliers and other key stakeholders who will also need to be involved in the process if it is to go smoothly and successfully.