Baker Tilly research indicates that four out of five businesses in the United States not ready for succession
CHICAGO (July 21, 2015) – A study of family-owned businesses conducted by Baker Tilly Virchow Krause, LLP (Baker Tilly) and Baker Tilly International, indicates that the majority of U.S. family business owners are not succession-ready.
According to the study, Succession Reset: Family Business Succession in the 21st Century, key challenges faced by family business owners include being ready for transition or market sale, and ensuring that the business has the financial capacity to support both retirement and the next generation.
“For family-owned businesses, it can no longer be assumed that the eldest child will take over the leadership of the business when the parent is ready to retire,” Mark Smith, partner in Baker Tilly’s private client group, said. “Having a succession plan in place can help ensure the transfer of knowledge, skills and wealth are taken into account to maintain business continuity and to preserve the capital value of the business.”
The study noted that approximately 73 percent of those surveyed do not see a compelling rationale to pass their business to a family member and would consider a sale of business. Baker Tilly research indicated that, as baby boomers exit management and control, family businesses valuing trillions of dollars will change hands over the next decade. If this transition is not managed well, there will be significant impact on global economies.
According to the study, continuity of the business, family harmony and sustaining ongoing jobs for employees are key outcomes sought in the succession process. “Beginning succession planning as early as possible, well before retirement, can help prevent challenges related to family harmony,” Smith said.
In the U.S., the study showed conflict in the succession planning process is higher and daughters do not have the same level of support to move into senior executive roles as their peers in other parts of the world. Only 10 percent of U.S. respondents reported the next top executive would be a daughter, compared with 19 percent on a global scale.
The full copy of Succession Reset: Family Business Succession in the 21st Century is available on bakertilly.com at http://www.bakertilly.com/insights/succession-reset-family-business-succession-in-the-21st-century/.
More information on succession planning can be found at http://www.bakertillyinternational.com/web/services/specialist-advisory-services/succession-planning.aspx.
About Baker Tilly Virchow Krause, LLP (bakertilly.com)
Baker Tilly Virchow Krause, LLP (Baker Tilly) is a nationally recognized, full-service accounting and advisory firm whose specialized professionals connect with clients and their businesses through refreshing candor and clear industry insight. With approximately 2,700 employees across the United States, Baker Tilly is ranked as one of the 15 largest accounting and advisory firms in the country. Headquartered in Chicago, Baker Tilly is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 147 countries, with 30,000 professionals. The combined worldwide revenue of independent member firms is $3.2 billion.
About the research
- The Baker Tilly International Succession Reset: Family Business in the 21st Century Report has been undertaken by some 2,650 persons across 56 countries in nine languages.
- Generations in the business included 45 percent first generation, 45 percent two to three generations, and 10 percent three or more generations.
- Of the respondents surveyed, 9 percent were greater than 67 years of age, 35 percent were less than 49 years with 56 percent baby boomers between the ages 49 and 67.
- Males represented 80 percent of respondents and 20 percent were female.
- 36 percent of respondents were from North America; 28 percent Europe, Middle East and Africa; 27 percent Asia Pacific and 8 percent from Latin America.
- The survey focused solely on the issue of succession and is not part of a general family business survey. It is structured to focus on the dynamics, barriers and success strategies experienced in a succession process. It considers respondents’ experiences from the three perspectives of having completed a succession process, in the midst of a succession process and not yet commenced and, therefore, provides alternative perspectives of how experience varies across the journey of succession.
- There is no connection between the client and their individual responses and therefore all responses remain confidential and anonymous.
- The conduct of the survey is subject to the ethical oversight by Swinburne University of Technology in partnership with Baker Tilly Pitcher Partners in Melbourne, Australia.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.