Family business principals doubt next-gen's abilities

Family business owners looking to pass on the business to the next-generation are concerned about their ability to handle operations, according to research by Family Business Australia and KPMG.

The report, which surveyed around 700 family businesses in Australia, found almost 60% willing to sell the company if approached by a genuine buyer due to concerns about their successor’s capabilities and qualities to take over the helm.

Philippa Taylor, chief executive of FBA, told CampdenFB: “This is often because parents are so anxious for the business not to be seen as an obligation that they often fail to have the right conversations around it. Owners need to be encouraged to highlight the opportunity on offer – and have those conversations about transition, transfer of leadership and equity.”

The study also looked at governance issues at Australian family-controlled businesses.

The future strategy of the business is the most likely cause for a conflict between generations, the survey said, followed by questioning the competence of family members working in the business.

But the research found that Australian family businesses are taking steps to resolve conflicts through a combination of family councils and bringing in outside board directors. More than a third of the respondents think their existing governance structures are adequate, up from the 21% in the 2010 survey.

“While some family members may feel their business is too small to have a board in place, the benefits of taking that step towards professionalisation have been proven beyond doubt," Taylor said.

Among other findings, the survey revealed that family businesses are better able to deal with financial setbacks than their non-family counterparts, aided by high trust levels between family members and flexible planning.

When it comes to remuneration, the study found there was equal pay for both family and non-family members. Around 60% of respondents pay the same amounts to family members and outside professionals, while around 15% pay less to family.

FBA, which is Australia’s lobby group for family businesses, conducted the research, entitled Stewards: Moving forward, moving onward in April and May this year in collaboration with KPMG.

The businesses surveyed spanned many different industries, and their revenues ranged from $500,000 to more than $200 million.