Doing Companies The Right Way

Why People Fail to Plan for Business Succession

Research has proven that over 70% of the businesses do not get handed over to the next generation. Succession planning is deliberately left unattended to, this explains the above scenario. The delicate nature of this issue has resulted to sibling rivalry, tax hurdles and political power plays. A previous preparation for the family business transition will ensure such issues are avoided. Despite this, there are many other reasons that lead to family business succession failure.

Fager and McKinney 2007 explain that family business transition planning is ignored due to a couple of reasons. The pleasant times high is the first one. Good times make people not to pay attention to the difficult and trying times. It is easier to maintain a business’s success when one is still in charge than after they are gone.

There are some difficulties that businesses face such as mistakes in accounting, a broken plant and theft by employees. These problems need to be tackled. Not planning the business transition will decrease the chances of a business prospering in the long term. The other category is immortality complex. The meaning of this is that many do not like to face the reality of death or sickness. This negatively impacts successful entrepreneurs. Employee and family wrangles fears can make people avoid planning for succession.

Family members can get emotional or political and this can lead to mismanagement of the business. These issues make people to even fear planning for the future events. Sone people are not ready to leave behind their businesses. Most entrepreneurs feel they have reached greater heights. 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 are complex and when the business is being sold or transitioned to the next generation. People usually stop paying attention to tax problems and they attend to other issues. Another thing that leads to the ignorance of succession planning is the wavering faith in the successor. The business can experience more growth when it is run by a great successor. However, people normally tend to have uncertainties 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. The effects of not attending to these issues in the short term will escalate in the long term.

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