Succession Challenges Family business owners in India

Family business owners in India find themselves at cross roads – they have struggled hard to grow the business, however now most businesses are facing the following challenges: 

1. Business survival and viability – are there political, economic, social, technological, legal OR environmental factors, that can have a negative impact on my family business
2. Next generation is not interested in taking over the businesses 
3. In case of multiple children working in the business – identifying the succession solutions so that the business transition happens in a harmonious manner and family unity is maintained

The current generation is often not interested in running the business as due to their education and exposure to the outside world, they are interested in moving abroad or running their own start up. 

Further, they might not be cut out to run a factory, deal with labour issues, face constant harassment from Government Authorities and react to profitability issues due to growing competition. They are concerned about work – life balance and not used to hardship like their parents.

Another key issue is the location of the business or nature of the business – if the location or the nature of the business is not to the liking of the current generation – they have no hesitation in walking away, as they know that their financial future is secure due to family money.

The current business owners have to think rationally and emotionally, as to what is best for the family and how the family wealth can be maximized, while understanding the mindset of the successors.

As business owners grow older, they should consider the following questions:

• What legacy do I want to leave behind – a successful transition is a stamp of greatness
• When do I plan to retire and do the things I want – travel, hobbies, philanthropy etc
• Is my business viable in the future – does it face competition, government & labour issues etc
• Are my children interested in running the business – is their education proceeding accordingly
• If the kids are interested, what training and experience will they need – external and internal
• If I have multiple kids – who will lead the business and how can I be fair

In these circumstances, it is critical for the business owner to identify solutions so that the family legacy is maintained and socio – economic benefits are transferred to the next generation. 

Protection of family assets has also to be considered taking into account the financial needs of the current generation and future requirements.

A visionary family business owner must understand that time flies and therefore evaluate options for a successful business transition

1. Put a plan in place, in case of a sudden family event happening
2. In case children are interested and business is viable – plan for succession in the future
3. In case of children not interested and business not viable – plan to exit the business, at the right price
4. Plan family trusts to protect the family financial assets 

FBTM, is a professional family business transition management company – we work with business families to understand the legacy they wish to leave and assist with harmonious business transitions.