Family enterprises the backbone of the economy
Family enterprises form the backbone of the Australian economy, employing more than 50% of the workforce.
As family business advisors, we keep an eye on trends in the family business sector. The success of family business inevitably comes down to the fine art of integrating and balancing the needs between ownership, family and business.
HERE ARE SOME REASONS WHY FAMILY BUSINESSES STRUGGLE:
- POOR SUCCESSION PLANNING: Entrepreneurs become hesitant to place their possessions in the hands of another, which may arise from the occurrence of retirement or sudden death. Here, planning cannot be done in isolation of the family.
- LACK OF TRUSTED ADVISERS: Trusted advisers should be able to work collaboratively with other disciplines such as lawyers and financial planners.
- FAMILY CONFLICT: Many families lack procedures that help manage conflict in an objective and productive way.
- DIFFERING VISIONS BETWEEN GENERATIONS: Generational conflict, especially if there is disagreement in core values. The next generation may reject established work methods. Predecessors should show flexibility.
- FAMILY GOVERNANCE: Formalise the way the business is managed and operates between family and business. Without governance, businesses are open to the risk of internal discord.
- LIMITED ACCESS TO CAPITAL: Businesses that have sought outside funding will have experienced tough going. Generally, banks are not interested in long time horizons and complex family dynamics.
- POOR BUDGETING: Businesses that don’t budget properly cannot manage their costs or set prices for a profit. Effective accounting requires budget, balance sheets, cash flow, profit and loss, revenue and expense breakdowns.
- TAX PROBLEMS: Proper accounting helps you keep track of your tax obligations, make tax payments and avoid fines.
A good succession plan can ensure that you have the funds you will need to retire and the business you have built will continue to thrive. For assistance with planning your Family business in a way that will minimise future problems occurring or for resolution of existing complicated issues and problems relating to Family businesses, contact us at Rubiix Telephone: 03 9603 0066.
Submitted by: Eric Farrance – Senior Manager