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. 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. A previous preparation for the family business transition will ensure such issues are avoided. Despite this, there are many other reasons that lead to family business succession failure.
There are a number of categories that explain the reasons for neglecting family business transition according to Fager and McKinney 2007. The pleasant times high is the first one. When the times are good, people tend to ignore the difficult and hard times. The business’s success can be easily maintained when a person is still managing it not after they have gone.
There are some difficulties that businesses face such as mistakes in accounting, a broken plant and theft by employees. A solution needs to be found for such issues. The company will have minimal chances of being successful as the long term ramification of not planning succession. The other category is immortality complex. This means that most business people do not want to come to terms with death or sickness. People who run their businesses are negatively affected by the immortality complex . Family and employee disagreements ate the other reason why people avoid planning for business transition.
Poor business management can result when the members of a family get emotional or political. Such events causes people to neglect planning for business succession. There are those who still want to hold on to their businesses. Most entrepreneurs feel they have reached greater heights. All the time and effort put to make the business grow can make the entrepreneur feel like they cannot leave their business. Entrepreneurs also wonder who will run the business when they go.
It is hard to understand tax hurdles during the event of selling or transitioning the business to the incumbents. People usually stop paying attention to tax problems and they attend to other issues. 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. Even though the above is possible, people tend to have worries 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. The effects of not attending to these issues in the short term will escalate in the long term.