FAMILY business owners are keen to keep the business in family hands, but are concerned about their offspring’s ability to take over, according to the annual Family Business Survey undertaken by KPMG and peak body Family Business Australia. CEO of Family Business Australia Philippa Taylor (pictured), says that ‘control’ in a family business is not only about equity, but more about the management and culture of the business.
Within the next decade, 60 per cent of family business owners will pass on the leadership to family or non-family members.
The survey of nearly 700 Australian family businesses shows that 57 per cent of incumbent respondents are concerned about the motives of their potential successor and 63 per cent admit some concern about the ability of their successor.
Our survey has found that control in a family business is often aligned to a sustained competitive advantage. This grows from a personalisation of relationship, financial flexibility, resilience, superior service quality and innovation.
The typical family business is more likely to accept a prolonged period of low or negative returns in order to execute their strategies.
Forty-six per cent of respondent businesses have a board in place and just 23 per cent coordinate an independent review of their management team, highlighting that governance of the family business for many remains relatively informal.
Succession and a contingency for accident or illness are two issues that would naturally be on a board agenda in the assessment of key business risks.
While some family members may feel their business is too small to have a board in place, the benefits of taking that step towards professionalisation have been proven beyond doubt.
Putting paid to the notion that family members are favoured when it comes to remuneration, 61 per cent of respondents said they pay family members the same as non-family and 14 per cent said they pay family members less.
The contribution of family businesses to the Australian economy is enormous, yet for all their importance, our knowledge and understanding of this sector is relatively limited.
Family businesses account for more than 70 per cent of all businesses in Australia, with the wealth of the sector estimated at $4.3 trillion.
Head of KPMG’s Family Business practice Bill Noye, says the results suggest that many family business owners possess a strong sense on ongoing stewardship when it came to their business.
“A sense of stewardship does not disappear simply because an incumbent reaches an acceptable retirement age, or the next generation is ready to take control. This survey, exploring current thinking of family entrepreneurs, is highlighting that the motivations for succession are often impacted by the ambiguous nature of relationship with children and other family members”.
Despite these concerns, more than 60 per cent believe that maintaining control of the family business is their key priority and 88 per cent believe that family values improved the way their businesses were conducted.
This survey provides a bigger picture on the challenges facing a family business and how we can better help them to professionalise.
FBA is the peak body for family and private business in Australia. Its support programs are designed to build stronger families and healthier businesses while its education programs foster entrepreneurship, innovation and family business best practice.
Get our daily business news
Sign up to our free email news updates.