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MANAGING BUSINESS SUCCESSION

MANAGING BUSINESS SUCCESSION

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MANAGING BUSINESS SUCCESSION

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  1. MANAGING BUSINESS SUCCESSION By Elisante Ole Gabriel (Tanzania) egabriel@edenconsult.net, www.olegabriel.com +255-784-455-499

  2. ISSUES IN FAMILY BUSINESS MANAGEMENT SUCCESSION AND CONTINUITY: A FAMILY BUSINESS PERSPECTIVE

  3. Family-Owned Business • Stakeholders do not dictate operating strategies • Willingness to sacrifice short-term profit for long-term gains • Family member are more productive than non-members • Flexibility • Image of stability by family members

  4. Family-Owned Business: Cont... • Preserving the humanity of the workplace (high level of concern and caring) • Focusing on the long run • Emphasizing quality (culture of providing quality and value to the consumers)

  5. Advantages • Long-term orientation • Stability • Strong identification/commitment/motivation • Greater reliance in hard time

  6. Advantages • Less bureaucracy and impersonal • Financial benefits • Knowing the business (early training of the family members)

  7. Disadvantages • Less access to capital market • Confusing organization (no clear division of work) • Nepotism • Spoiled-kid syndrome • Interncine strife • Paternalistic/autocratic rule

  8. Disadvantages: Cont... • Financial strain (family members milking the business, disequilibrium between contribution and compensation) • Succession dramas

  9. Management Succession Issue • Lack of preparation for passing managerial control to the next generation • If a key person is removed, the business ends • Fear of losing status

  10. Key Factors in Succession • Family succession includes the transfer of ethics, values and traditions along with the actual business itself • Pressure and interests inside the firm (family members and non-members being employees)

  11. Inside the Family • Getting hold of company control • Family members as managers • Continuity of family investment • Building a dynasty • Rivalry

  12. Outside the Family • Rewards for loyalty • Sharing of equity, growth and success • Professionalism • Bridging family transitions

  13. Outside the Company • The relatives of the family: • Income and inheritance • Family conflicts and Alliances • Degree of involvement in the business

  14. Outside the Company: Cont... • The outsiders • Competition • Market, product, supply and technology influence • Tax laws • Regulatory agencies

  15. Sources of Succession • Entrepreneurial successor (high in ingenuity, creativity) • Managerial successor (efficiency, internal control, effective use of resources)

  16. Developing a Successor Strategy Understanding the Contextual Aspects: • Time (the earlier the better) • Type of Venture • Capability of managers • Entrepreneur’s vision • Environmental factors

  17. Developing a Successor Strategy: Cont... • Identifying Successor Qualities (sufficient knowledge of the business, position specially marketing or finance, honesty, capability, health, alertness, time, etc)

  18. Developing a Successor Strategy: Cont... • Understanding Influencing Forces • Family and Business Culture issues • Owner’s Concerns • Family members concerns.

  19. Developing a Successor Strategy: Cont... Carrying out the Succession Plan: • Identify a Successor • Groom an Heir • Agree on a Plan • Consider outside help

  20. FINALLY Steps for Selling a Business • Prepare a financial analysis • Segregate assets • Value the business • Identify the appropriate timing • Publicize the offer to sell • Finalize the prospective buyers • Remain involved throughout the closing • Communicate after the sale

  21. CONCLUSION • The steps provide a clear framework within which entrepreneurs can structure a fair negotiation leading to a sale, hence, harvesting their venture.

  22. THE END • “It is likely that a good entrepreneur develops a good successor and the opposite is true” (Gabriel, 2004)