Planning for Succession
According to PricewaterhouseCoopers’ 2014-2015 US Family Business Survey, most family businesses in the US — 75 percent— are family-run for two or more generations. Among the business owners surveyed, 48 percent expected to pass their business on to the next generation to own and run. Of that number, 26 percent anticipated passing ownership on to their children — but not the duties of running the firm. Nineteen percent said they plan to sell, and 7 percent do not know what they will do.
Extricating oneself from one’s real estate company can be a drawn-out process. In the PwC survey, 40 percent of family business leaders said they feel some hesitance to pass the business on to the next generation, and believe they will have to stay involved for longer than they would like in order to ensure a smooth transition. And yet 73 percent do not have any sort of documented succession plan for who will fill their leadership role once they leave.
Research by the accounting firm Baker Tilly International indicates that establishing a plan of succession early on can result in a successful transition, no matter what form it takes. Of those family business owners surveyed, nearly 88 percent of those who established clear goals for their company’s future achieved them.
The Baker Tilly research identified several guiding principles for establishing a succession path, starting with the understanding that succession does not necessarily mean retirement, and that it will take time, commitment and motivation to bridge the transition from the current management team to the next generation. Also making the list were the importance of establishing clear goals, planning and beginning the process early and maintaining harmony within the business.
“We start the process by having that end goal in mind, where you need to be with your business,” said Reeta Casey, an Orlando-based broker and principal real estate coach for The CORE Training.
“What number do you need to hit for your financial security, so that you can retire?” she asks.
“That’s what we work toward. By doing that, it helps you set a path and find a goal for where you want to be when you retire. It’s kind of great when you have your head down and you’re working hard, and all of a sudden you look up and you’ve hit your number.”
Next: Keeping it in the Family