Importance of Succession Planning for Indian Family Businesses

For Indian Family Businesses, succession planning has become a key factor as it ensures the long term survival of the business OR if the generation is not interested in running the business, it provides options and opportunities for the business owners to evaluate the next course of action.

Succession planning means to successfully transition the family business to the next generation:

·?????? If the heirs are interested in running the business – then involving them in leadership and decision making roles, so that they enjoy the socio – economic benefits generated by the business

·?????? If the heirs are not interested in running the business – then selling the business

Succession planning in India is getting complicated due to the following factors:

1.?????? Too much competition that is impacting the revenue / profitability and cashflow of the business

2.?????? Children educated in different fields and not wanting to run a service / manufacturing business

3.?????? Next generation wants to live abroad – due to employment, lifestyle, health reasons etc

4.?????? The next generation wants to run their own business / start up? etc / partner with friends

5.?????? The generation is entitled and wants a work – life balance and is not willing to put in long hours

6.?????? The generation does not want to run manufacturing business and the associated problems of labour, government interference, corruption, environmental issues etc

One more issue is due to the growing families – the business family now has multiple children in the business and therefore the question becomes – who will lead the business in the future.

All the above questions need to be addressed to ensure that the business family’s vision to transfer socio-economic capital and the maintain family’s legacy and unity across generations is maintained.

The faster the business family starts the business succession discussion, the better it is, the below chart details the age when the family discussion moves from important to urgent:

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Therefore, for preservation of family wealth, family name and social status and avoidance of family conflict, a sound and structured business succession plan need to be developed so that the succession process is smooth and allows for future wealth creation with unity amongst the family.