Who am I leaving my business to?

N​​​​​​​edbank Private Wealth has revealed a poll that shows that entrepreneurs and business still have a lot of personal and family issues that need to be addressed. 

According to the research, which polled over 500 leaders of medium and large businesses in the UK, 46% involved their children in their companies with 42% doing so with future inheritance in mind. 

However, 24% currently find involving their children as a challenge and 23% stated that past family involvement did not work out well. 

This is fairly worrying as 85.9% of all private sector businesses are family-owned and contribute £575bn to the UK’s GDP, but a mere 30% of family businesses survive the move from the first to the second generation. Only 10% make it to the third generation of ownership and management. 

Generation Z is predicted to represent 27% of the UK workforce by 2025, but of those surveyed who do not involve their children in the running of their business, 66.6% say they either lack the drive or are not capable.  

Furthermore, 37% stated it is because the next generation could not handle the challenges of running the company. 

Stuart Cummins, CEO of Nedbank Private Wealth, commented: “As we navigate through an era of change, it is clear that the future of UK entrepreneurship hinges not only on economic stability but also on the successful transition of family businesses to the next generation. 

“It’s so important to work closely with families navigating this transition, getting under the skin of the concerns held by those passing on the mantle of the family business and balancing with the concerns of those stepping into the helm of UK family run businesses. Ultimately, we work with our clients and their advisers to consider the important transition of family businesses to the next generation.” 

Much has been spoken about wealth transfer in the sector, but not necessarily to whom people are transferring. Are these results surprising? 

Speaking to PBI, Simon Gibbons, executive head - wealth management, Nedbank Private Wealth, said: “I think that the main one was 67% of the people interviewed actually didn't think their children could succeed them. It is quite a challenge for them to come down those roads, absolutely. And when you add a little bit more into it as well, you look at that 67% and then you look at the 54% of them don't even involve their children, you can also understand why you don't have huge take up of children taking over business.” 

What is there to worry about? Is the next generation that much different when it comes to business? 

“They might look at business differently. I think that's the difference,” Gibbons explains. 

He adds: “I think what we are seeing a lot more of is that [the next generation will] add their lifestyle into how they want to work. I think they are actually better for it as well, if we're being realistic. 

“One of the bigger changes that we are definitely seeing in other research that has come out very much says that you likely have around 15 or 16 jobs now in your working career. This is a big change. Most other people have had maybe five different careers, right? When you actually take that into account, that these people are taking over the family firm, it depends on how entrepreneurial one is, but also, what is the motivation for the individual? Or are the children happy to actually be put into a pigeonhole to a certain degree, and then struggle with that going forward?” 

How do you combat this? 

Gibbons states: “We have those conversations on private wealth and they are very much around communication about what actually both parties are looking for when you're moving these businesses on. 

“Usually these conversations only really take place near a retirement or ill health, or there has been a trigger event of some description. That is when first conversations take place, where actually you should be planning this years before and actually educating the children, with regards to what the company looks like.” 

Is the way Nedbank approach wealth and business transfer a differentiator? 

Gibbons concludes: “It absolutely it is a differentiator, and we are taking it extremely seriously. That is the real point here, that you can play at it, but what we really want to be doing is headlining it, and we really need to make sure that no one is under the illusion, later on, that this doesn't take planning.”