Auto Service World
News   June 20, 2003   by Auto Service World

AIA Convention: Handing Over Reigns Fails Without Planning

Statistics on privately held companies are startling, with some 80% to 90% of businesses in North America privately held, but only a few lasting more than a generation or two, according to succession planning expert Aida Van Wees.
As a facilitator at the Centre for Entrepreneurs and Family Business at PriceWaterhouseCoopers, she has seen plans to hand over a business to the next in line fall apart on more than one occasion.
"Over the next 15 years, three-quarters of business leaders are going to retire," she told AIA Western Regional Conference attendees. "Trillions of dollars will be transferred to the next generation.
"The reality is you don’t do this very well. Only 30% will continue as a family operation into the second generation. Less than 10% make it to the third generation. Only 1% will make it to the fourth."
The reasons for failed succession plans are usually simple, she says. Whether because the subject of retirement and mortality makes business owners uncomfortable, or because it is unclear on who should take over, entrepreneurs fail to plan. And when they do plan, they often make errors.
"Plans are devised by the entrepreneur according to their own perspective. They project that the position they are in is the position their children want. Often that is what they get back from their children." The truth is a different matter: often the children didn’t want to run the company, but were too afraid to saying anything to dear old dad.
More often though, a lack of planning, or planning too late, causes problems.
"Succession plans fail because of lack of planning, the chosen successor was not adequately prepared, or a clear successor was not chosen." Conflicts within the family and without can arise, employees who feel slighted or ignored can sabotage plans, and key employees may leave if the newcomer isn’t trusted. These are all situations that can be addressed with proper succession planning strategies.
"We need to teach our shareholders, those in ownership, how to be shareholders. We need to teach our families in business to be good families in business."

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