Just four in 10 family business owners have any form of succession planning in place, according to a new study.
Legal & General, which published the report, says businesses are leaving themselves at “considerable risk of failure” by not planning for the future.
Succession or exit planning is an important part of any business. By planning ahead, directors can comfortably predict the future and account for obstacles accordingly.
For example, many of our clients often ask how inheritance tax works when passing a business over to a family member, or how capital gains tax works when selling a business.
Another common scenario is looking at who will take over the business when you’re gone or fall ill.
By looking at these important management aspects now, business owners can reduce bills and have peace of mind that your family or business partners aren’t left in an awkward predicament.
However, figures show that the majority of businesses don’t have a robust plan in place to pass down a business.
Legal & General found that just 27 per cent of family businesses would survive the transition to the second generation. Moreover, 57 per cent of family-run firms say they would have to cease trading with a year and a quarter if its chief director fell ill.
Richard Kateley, head of intermediary development at Legal & General, comments, said: “Family businesses have played an important role in Britain’s economy across the generations, but as these figures show, sadly many of them are ill-prepared for a critical event or even the transfer of ownership from one generation to the next.
“With nearly half of these businesses rating the death of an owner as the highest risk to their operations, the UK’s family-run firms have clearly recognised the impact a critical event can have on their business, yet so many lack the necessary plans to help them manage the loss of a key person.”