Successful succession planning remains a major issue for UK entrepreneurs, a new survey reveals.
More than half (54 per cent) of business owners do not currently involve their children in the running of the company. Of those who do, nearly a quarter (24 per cent) find it challenging.
Researchers at Nedbank Private Wealth spoke to 500 owners of medium and large businesses across the UK. The results reveal the significant hurdles faced by family-owned businesses, which contribute £575 billion to GDP.
The useless generation?
Gen Z is set to represent more than 27 per cent of the UK workforce by 2025. Yet their parents and older family members have significant reservations about handing over the reins to this rising generation.
[See also: Why the Great Wealth Transfer will be a dangerous time for global capitalism]
Of the business owners who do not involve their children in the running of the company, two thirds (67 per cent) say it's because their children either lack the drive or are not capable, while 37 per cent say it's because their heirs couldn’t handle the challenges.
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The result of this generational divide plays out in the numbers: only about 30 per cent of family businesses survive the transition from the first generation to the second; only 10 per cent survive another generational transfer.
[See also: Who’s afraid of the big bad next gens?]
Private wealth advisers have spoken extensively about the importance of implementing a clear succession plan to ensure wealth, assets and businesses are seamlessly transferred.
Secrets to succession
Simon Gibbons, executive head, wealth management, Nedbank Private Wealth, noted: ‘Succession planning goes beyond imparting the facts and figures of your business. Your children need to also inherit your drive and determination for the momentum to continue. Entrepreneurs often tell us they worry about the next generation’s readiness to lead, facing doubts about capabilities and complex family dynamics and our new research supports this.'
Stuart Cummins, CEO of Nedbank Private Wealth, added: 'As we navigate through an era of change, it is clear that the future of UK entrepreneurship hinges not only on economic stability but also on the successful transition of family businesses to the next generation.
'It’s so important to work closely with families navigating this transition, getting under the skin of the concerns held by those passing on the mantle of the family business and balancing with the concerns of those stepping into the helm of UK family run businesses.'
There has also been an uptick in the number of advisers offering programmes to ensure the next generation is properly prepared for the task at hand.
[See also: Preparing the next generation is a ‘primary concern’ for family offices]
‘The notion of entitlement often clouds discussions surrounding individuals from prominent families,’ notes Russ Haworth, principal of Rise, a programme for emerging generations.
‘It’s easy to assume that they’ve had everything handed to them on a silver platter and that they lack the resilience or drive to succeed on their own merit. However, this oversimplified view fails to recognise the internal struggles and external pressures that shape their identities and aspirations.’
