Successful family businesses need to openly discuss the issues of wealth transfer and succession planning, says Dr Keith Duncan, Director EMBA Program, Bond University, Bond Business School.
Family businesses are at the heart of the Gold Coast and Australian economy.
Representing around 70 per cent of all business in Australia, they provide employment for family and non-family members. The majority has more than one generation of family members working in the business.
Simply by operating as a family-owned business, these types of organisations will face a number of unique opportunities and challenges that non family businesses do not face.
Typically, family businesses have resources that non-family companies don't have, and when combined, they can present a strategic advantage for the operation. However, conflict can present itself in a number of areas, including ownership, reward and recognition, employment, and succession planning to name a few.
As family businesses grow in complexity, and the family grows in size through marriages and births, the dynamics of the family system will continue to change. This continual change means that the family must find a way to manage these changes and how they might impact the family, and the business itself.
In particular, one pressing issue facing family business owners is the issue of wealth transfer and succession planning. A recent survey by Bond University's Australian Centre for Family Business has shown that more than a third of family businesses in Australia intend to transfer wealth in the next five years.
In the interest of preserving the legacy of the family business, most family businesses will transfer wealth to the next generation or other family members. The survey also indicates that half to two-thirds of family business owners have wealth transfer plans in place which suggests many have dealt with the wealth transfer issue. However, a more critical issue for many family businesses is successor selection. Most importantly, it is crucial for the benefactor to recognise when they have reached the financial capacity to retire and have a level of trust in the successor.
When combining the above mentioned issues, it's of great importance to assess beneficiary level factors such as the beneficiary's competence, education and his or her experience in running the business. These are the most important factors to consider when transferring wealth.
Traditional factors such as gender, age and birth right play the dominant role in many other cultures, but do not seem to be of similar importance in Australia. Rather, at the business level, it is by far most important that the business is able to generate adequate financial returns. Bond University's Bond Business School provides a number of family business programs to assist families in business and those who are interested in providing services to this sector.
The Graduate Certificate in Family Business covers a number of the core issues often seen in family businesses including: succession planning, leadership, professionalising family business management and governance.
When one looks at the highly successfully family businesses around the world and in Australia, their governance includes the right balance of family assembly and council, owners' board and shareholder meetings and business top management meetings.
The difficulty for family businesses is to get the balance of these formal structures right, given the development lifecycle of the firm and family. Bond University's Family Business Certificate equips family business owners with the knowledge and skills to deal with these issues.
For executive members in a family business who would like to undertake more integrated manager training at the highest level, Bond also provides education through a specialised Family Business Executive MBA program in which participants advance their business knowledge of family business and governance issues.
This article was originally published on Gold Coast Business News. Link: www.goldcoastbusinessnews.com.au