Why People Fail to Plan for Business Succession
Research has proven that over 70% of the businesses do not get handed over 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. Family business succession failure is linked to may other reasons.
Fager and McKinney 2007 explain that family business transition planning is ignored due to a couple of reasons. Firstly, is the good times high. Good times make people not to pay attention to the difficult and trying times. Running the business is deemed to be much better when the person is still present no when they have left.
The business experiences problems like theft by employees, a broken plant and mistakes in accounting. These problems must be resolved. The long term effects of not planning for succession will negatively impact the company’s chances of success. Immortality complex is the other reason. 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.
Family members can get emotional or political and this can lead to mismanagement of the business. The preparation for business transition is ignored by people due to these factors. Sone people are not ready to leave behind their businesses. Most entrepreneurs feel they have reached greater heights. The time and sweat that was invested in the business makes the entrepreneur feel like they should still hold on to the business. 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. The tax problems are then swept under the rug so that more pressing issues are dealt with. 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. Business succession failure is as a result of lack of succession planning. The effects of not attending to these issues in the short term will escalate in the long term.