Key findings from Family Business Survey 2009 – Just released

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Key findings from Family Business Survey 2009 – Just released


Key findings from Family Business Survey 2009 – Just released

By , October 23, 2009

In the recently released family business survey 2009 prepared by KPMG & Family Business Australia supported by Bond University’s Australian Centre for Family Business a number of very interesting issues have been highlighted. Based on a survey of 613 family owned businesses in Australia conducted in June 2009, the survey, which is conducted annually, is an interesting insight into family business and some of the key issues surrounding the structures and mechanisms they employee, growth and progression, economic views and of course succession planning and the next generation.

Some of the key findings are that many respondents to the survey are concerned about balancing family concerned with business imperatives retaining family control and ownership and arranging fair compensation of the family members with active business involvement. These concerns give rise to a variety of structures and governance processes designed to hopefully reach a balance between the competing interests. For example only 28% of respondents have established formal family councils. A third of the surveyed businesses possess a board or other formal governing body or structure and a further 43% say they rely on less formal structures.

A little more than 40% of the respondents planned to pass on the business to their children or other family members and interestingly now 20% intend to eventually sell the business to other owners or key employees. 45% of the respondents already have someone from the next generation working within the business.

In terms of succession planning again some interesting findings come to light – for many family businesses the act of succession planning is much more complicated than who and when. It can raise very sensitive issues about the future of the business, the potential crystallisation of substantial tax liabilities, the distribution of wealth accumulated within and around the business, individual mortality and relations between family members. Careful strategic planning is obviously essential. However only 15% of the survey businesses reported having any formal succession plan in place a further 30 odd percent said they were currently working on one ( not sure exactly what that means).

A variety of exit options were identified and prioritised as outlined in the table below:
Pass on the business to the next Generation 28.8 %
Sell business to other owners or employees 19.8 %
Sell the business on the open market 16.4 %
Pass on the business to other family members 12.9 %
Close the business 5.4 %
Bring in a partner 5.4 %
Publicly list the business 5.0 %
Other 4.5 %
None of the above 1.7 %

We often find with clients a “time lag” approach to succession planning – for most surveyed businesses the proposed handover or sale of enterprise remains some years off. Of course, illness, sudden death or accident can throw long-term plans into disarray, leaving both business and family unprepared for the changes facing them. Business succession or disposal plans can and do often change:
Next 12 mths % Next 3 yrs % Next 5 yrs % More than 5 yrs %
Pass on the business to the next Generation 3.2 10.6 22.0 64.2
Sell business to other owners or employees 8.7 19.3 28 44
Sell the business on the open market 8.9 13.7 17.7 59.7
Pass on the business to other family members 2.0 14.3 23.5 60.2
Close the business 7.3 7.3 17.1 68.3
Publicly list the business 0.0 13.2 18.4 68.4

Several influences on the succession process were identified and prioritised in order however the businesses ability to generate adequate financial returns was regarded as the most important influence on their succession plans ( in order of impact / priority ) :
The business ability to generate adequate financial returns
Level of trust in the abilities of the potential successors
Level of interest of potential successors in the business
The motives of potential successors
The financial capacity to retire
My willingness to let go
Legal requirements of the succession process
Willingness of financiers to support succession / retirement
Lifespan of family trust structures
Capital gains tax implications
The impact of the global financial crisis

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.

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