CHANGE A CHALLENGE FOR FAMILY BUSINESS

CHANGE A CHALLENGE FOR FAMILY BUSINESS

SUCCESSFUL family businesses need to openly discuss the issues of wealth transfer and succession planning, says Dr Keith Duncan (pictured), Director EMBA Program, Bond University, Faculty of Business.

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 Faculty of Business 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.

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

From pandemic side hustle to multi-million dollar business: Meet Ling Fung
Partner Content
Ask any parent, and they’ll tell you: preparing for a new baby is no easy task.&n...
Metro Baby
Advertisement

Related Stories

ACCC gives Compare the Market operator green light for iSelect takeover

ACCC gives Compare the Market operator green light for iSelect takeover

The Australian Competition & Consumer Commission (ACCC) has ann...

How Sourci made it: Meet the founders behind Australia’s new e-commerce wave

How Sourci made it: Meet the founders behind Australia’s new e-commerce wave

In just four short years the co-founders of product development con...

Competition watchdog sniffs at Cochlear-Oticon acquisition

Competition watchdog sniffs at Cochlear-Oticon acquisition

The management at Cochlear (ASX: COH) are hoping to add an extra 75...

Domino’s raising $165m to buy out German partner after settling deal for two new Asian territories

Domino’s raising $165m to buy out German partner after settling deal for two new Asian territories

A day after wrapping up two new Asian territories as part of the bi...