All in the Family: Succession planning & the entrepreneur’s journey
From speaking to clients and colleagues, I know that succession planning can be an unexpected and unplanned challenge for business owners.
Consumed for so many years by the effort to grow and develop a company, many entrepreneurs haven’t envisioned a future without themselves at the helm.
As part of BNP Paribas, we surveyed over 2,500 elite entrepreneurs (those with $10 million or more in investable assets) for our 2019 Global Entrepreneur Report and discovered concerns that will be familiar to many business owners facing the succession question.
Here are some key findings from the report I wanted to share:
- A vision for a family owned future. More than half (51%) of those surveyed said that their plan is for ownership of their business to eventually pass to a family member. The top reasons for this is a desire to safeguard the firm’s financial value, have trust in the next generation to develop the business, and to preserve core values.
- Anxiety about the next generation. Some 53% of elite entrepreneurs believe their successors are not ready to take over their responsibilities, and 13% have not even identified anyone suitable. However, 47% of ultra-high net worth entrepreneurs (those with investable assets of $25 million or more) are fully confident in their firms’ future leaders.
- Evolution of transfer strategy. As many as 62% of entrepreneurs in the early stages of building their business said they plan to pass the company on to a family member. However, this falls to 37% as they get closer to exiting. Alternatives options to family succession such as a management buy-out or sale to a new owner, become more attractive.
- Family governance equals a pathway to strategy consensus – Almost a third (29%) of entrepreneurs said they will implement a family governance code before relinquishing their responsibilities. A code fulfils two important objectives; smooth integration of family members into the firm and definition of the long-term business plan.
I’ve often heard from business owners we work with that they wish they had started succession planning earlier, and that’s why it was heartening to see that the entrepreneurs we surveyed recognize the role wealth managers can play.
In fact, 92% of these entrepreneurs said they would value succession planning from their wealth managers to better prepare the next generation.
Check out the full BNP Paribas 2019 Entrepreneur Report – Part II including a breakdown of critical stages in the business lifecycle, how entrepreneurs are using merger and acquisitions and credit to innovate and grow.
For more information on our approach to financial and wealth planning and how we can help you with your succession planning, please contact us.
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