In fact, on average only 30% of family businesses survive into the second generation, 12% into the third, and 3% into the fourth.
Audit, advisory and tax firm, BDO have seen similar trends coming out of its Pretoria office, where a large sector of their clients are family-owned businesses. Sarie Treeby, Audit Manager at BDO Pretoria says that their clients are aware of what a succession plan is but many don't have one.
"Our clients are not interested in succession plans for various reasons - their children aren't interested in taking over the business, there isn't an obvious successor to the business, family feuds, more than one possible successor - possibly leading to more feuds. More recently, the new BBBEE codes came into effect and this has further implications for the future of their businesses, as it means relooking at ownership."
"The risks involved in not having a succession plan can hamper the future of the business," says Treeby. "Without a succession plan there is the possibility that the business will close down, your family wealth becomes shareholder wealth and eventually your family run business becomes more of a "corporate" entity and in the process loses its reputation with customers and consequently, without family ties to the business it becomes easier to 'shut down'."
"It is important to note that a succession plan doesn't mean you have to pass the business on to a family member. What may be of interest to you, may not be to your child or family member and can lead to squandering of funds or loss of customers due to differing management styles," continues Treeby.
BDO advises owners of family businesses to have their financial affairs in order at all times. A will, estate planning and a succession plan for the business are essential to ensure that your business has the future or legacy you want for it.
