A Quick Overlook of Businesses – Your Cheatsheet

Reasons Why Family Business Transition Planning is Important

Studies have shown that more than 70% of the businesses fail to transition to the next generation. This is because of a lack or ignorance of preparing for the succession. This is a very critical issue that can lead to sibling rivalry, political power plays and tax hurdles. A previous preparation for the family business transition will ensure such issues are avoided. Family business succession failure is linked to may other reasons.

There are a number of categories that explain the reasons for neglecting family business transition according to Fager and McKinney 2007. Getting used to the good times is one of the reasons. Good times make people not to pay attention to the difficult and trying times. The business’s success can be easily maintained when a person is still managing it not after they have gone.

The business experiences problems like theft by employees, a broken plant and mistakes in accounting. These problems need to be tackled. Not planning the business transition will decrease the chances of a business prospering in the long term. Immortality complex is the other reason. The meaning of this is that many do not like to face the reality of death or sickness. People who run their businesses are negatively affected by the immortality complex . Family and employee disagreements ate the other reason why people avoid planning for business transition.

When the family members involve their emotions or political views, the business will not be handled properly as it should. The preparation for business transition is ignored by people due to these factors. Sone people are not ready to leave behind their businesses. Entrepreneurs usually feel they have accomplished a lot when they still hold on to their bisinesses. Most entrepreneurs feel they cannot let go of their businesses because of the time and effort they put in. Business people always wonder who will be in charge of the company if they left.

Tax hurdles can be difficult to understand when selling or handing over the business to the next generation. Tax issues are then ignored and more urgent issues are dealt with. People tend to lack faith in the successor and this is one of the reasons why succession planning is neglected. The business can get a good successor who can move the business to greater heights. Even though the above is possible, people tend to have worries about the successor. People do not want to experience such situations so they neglect succession planning. The failure rate in business transition is linked to the ignorance of succession planning. Ignoring these issues will be comfortable on the short term, the long terms effects are adverse.

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