Cherry Bekaert Urges Early Succession Planning
A study of family owned businesses conducted by Cherry Bekaert, LLP (“Cherry Bekaert”) and Baker Tilly International indicates that the majority of family-owned businesses in the United States are not ready for succession.
According to the study, Succession Reset: Family Business Succession in the 21st Century, key challenges faced by family business owners include being ready for transition or market sale, and ensuring that the business has the financial capacity to support both retirement and the next generation.
“We are in a new era of succession. It can no longer be assumed the children will take over the business from retiring parents,” said Kurt Taves, Managing Partner of Tax Services at Cherry Bekaert. “Owners of a family business need to have a succession plan in place that addresses the transfer of knowledge, skills and wealth to maintain business continuity and preserve the capital value of the business.”
The study found that approximately 73 percent of those surveyed do not see a compelling rationale to pass their business to a family member and would consider a sale of business. Baker Tilly research indicated that as baby boomers exit management and control, family businesses valuing trillions of dollars will change hands over the next decade. If this transition is not managed well, there will be a significant impact on global economies.
According to the study, continuity of the business, family harmony and sustaining ongoing jobs for employees are key outcomes sought in the succession process. “Creating a governance structure early in process can make the succession journey much easier and have a positive impact on family harmony,” notes Taves.
In the U.S., the study showed conflict in the succession planning process is higher and daughters do not have the same level of support to move into senior executive roles as their peers in other parts of the world. Only 10 percent of U.S. respondents reported the next top executive would be a daughter, compared with 19 percent on a global scale.
More information on succession planning can be found on Baker Tilly’s website.
About the research
- Baker Tilly International’s Succession Reset: Family Business in the 21st Century Report has been undertaken by some 2,650 persons across 56 countries in nine languages.
- Generations in the business included 45 percent first generation, 45 percent two to three generations, and 10 percent three or more generations.
- Of the respondents surveyed, 9 percent were greater than 67 years of age, 35 percent were less than 49 years with 56 percent baby boomers between the ages 49 and 67.
- Males represented 80 percent of respondents and 20 percent were female.
- 36 percent of respondents were from North America; 28 percent Europe, Middle East and Africa; 27 percent Asia Pacific and 8 percent from Latin America.
- The survey focused solely on the issue of succession and is not part of a general family business survey. It is structured to focus on the dynamics, barriers and success strategies experienced in a succession process. It considers respondents’ experiences from the three perspectives of having completed a succession process, in the midst of a succession process and not yet commenced and, therefore, provides alternative perspectives of how experience varies across the journey of succession.
- There is no connection between the client and their individual responses, and therefore all responses remain confidential and anonymous.
- The conduct of the survey is subject to the ethical oversight by Swinburne University of Technology in partnership with Baker Tilly Pitcher Partners in Melbourne, Australia.