In this article on planning for business succession, Family Business Advisor Bill Winter discusses the challenges when transitioning a business from one generation to the next – especially post COVID.
Our senior business owners and founders are an important segment of our business community and we wouldn’t want them to be forgotten in the COVID-19 crisis.
The Geelong and Barwon South-West region’s small to medium business owners are the economic backbone of our regional economy. Our twenty thousand businesses have been and will continue to be, driven by our senior business owners.
These senior business owners now face a new dilemma. Many are in transition from one generation to the next and part of that plan is to secure their finances in retirement by selling the business to the next generation at a discounted value. More importantly, most senior business owners own the real estate through their SMSF and rent the property to the next generation. Now, in this economic crisis, the business may not be able to pay the full rent as sales have suffered.
My own experience is that those older business owners are sticking around as they are concerned about the business surviving the crisis and want to assist the next generation to secure a profitable and sustainable future.
There are also the internal emotional aspects of inter-generational family members working together in a family business. Senior business owners have built these businesses over time and have experienced a roller coaster ride through the good and not so good economic times. They have sacrificed much and faced closure at times in their business journey. They are scared for what the future might hold.
The next generation have been educated differently and have different aspirations. They are most likely more capable to build on the foundation that already exists. They understand how changing technology is going to drive future business success and are better equipped to embrace whatever business model is needed to thrive after the COVID-19 crisis.
Thousands of business owners in the workplace are over 60 and many are family business owners. Especially the baby boomers who still own and lead most of our successful privately owned companies, often in partnership with their next generation members. This generation has an abundance of wisdom that is backed by knowledge, experience and a real life understanding of the roller coaster ride over the years since 1960.
This current crisis, although extremely serious, is not the first time senior business owners have faced an unknown economic future. Senior business owners are more resilient than most and pragmatic about adjusting to meet today’s needs.
I have been in their shoes on a couple of occasions and it hurts. One of the hardest issues they face is having to put loyal and long-term staff off.
So, listen to them and don’t ignore why they are sometimes cautious. They are great mentors and in today’s terminology, are wise coaches. They have walked in the shoes of many before them and not learnt their craft from a manual or attending a seminar.
A solution for small to medium business owners is to ensure you engage in open and honest conversations.
It’s all about having internal conversations as highlighted in a recent article in the national press through a comment from David Smorgon, a past member of one of Australia’s most successful family enterprises and a past family business consulting specialist at PwC.
30-40 % of family business leaders have not discussed the future of the business with their partner
50-60 % have not discussed succession with their children
82% have not discussed with their daughter-in-law or son-in-law
60% of second generation have not discussed family business succession with their partner
Our small to medium businesses will lead the local economy back to better times.
With thanks to our guest author:
Family Business Advisor
Point North Consulting
Bill Winter is a professional family business advisor with Point North Consulting. He is also a mentor and past business owner. He currently sits on three regional family business boards as a non-executive, non-family board member and is an external business improvement advisor. In the past he was also a lecturer at Victoria University TAFE for the Cert IV small business and the diploma in small business and a round table facilitator for The Executive Connection business owner’s monthly forums. Bill was the initial Chair of the AICD Director monthly Nexus forum in Geelong and sat on the AICD national mentor panel. In 2019 he was interim CEO at the Geelong Chamber and currently chairs the Geelong Chamber mentors selection panel. To get in touch with Bill, email him here.