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We trust that you will discover is a highly valuable read below from the Sunday Times.

Succession is the key subject as it is keyin reality when running a family business . The importance or succession is discussed well and the why it is so important to encorporate it into your Family business as soon as possible.

 

 

When Ted Dwyer became temporarily deaf in one ear a decade ago, he sent his first text message, asking his son Eamon to come home from Australia. Though Dwyer did not know it, this was the start of the process of handing over the reins of City Life Wealth Advisors, a life and pensions brokerage he set up 46 years ago.

 

“For a while Eamon worked for me, then we worked together, and now I work for him,” says Dwyer, 70, who has opted to leave the business to his son rather than give shareholdings to all four of his children.

 

“Other parts of the estate can go to other people, but Eamon will get the business. It’s a big risk because if the business was to fail, he would get nothing.”

This is the conundrum Dwyer now helps other families address, through his consultancy Ted Dwyer Family Business. He went back to college to study succession planning and has since helped clients manage the transition of their businesses to the next generation.

 

“One problem facing many family businesses in Ireland is that there is really only enough revenue in them to support one family, not two or more,” says Dwyer.

 

Emotional issues are tied up in handing over the reins, too. “Eamon and I have been working on this process for 10 years, and, even though it turns out he’s much better at the business than me, letting go is difficult. I’m still not used to it.”

 

For the Dwyers, it helped to have an outside chairman on the board to act as a mentor to Eamon and ensure the interests of the business, rather than the family, were to the fore.

Once you have made the changeover, it is important to accept it, says Dwyer. “Things happen in the business that I don’t necessarily agree with. If I’m asked, I’ll give my opinion, but I let Eamon make the decisions.”

 

The handover of many businesses was complicated by the recession, but they are getting back on track in the improved economic environment, says JJ O’Connell, of Family Business Ireland, a consultancy. He points to a recent report by the Economic and Social Research Institute, which estimated that the 55-64 age group in Ireland has wealth — including houses, pensions, investments and small businesses — worth nearly €350bn.

 

“A huge transference of wealth to the next generation is expected in the coming years,” says O’Connell. “It’s a real economic issue for Ireland as a whole to make sure this is managed efficiently.”

 

Whether family or not, the next generation of management must be educated and trained to take on a business. Companies should start succession planning as early as possible, says O’Connell, with simple business continuity plans outlining who will step into a particular role during a crisis.

 

“You don’t want to leave these matters until circumstances take over, be it a car accident, stroke or any of the things that can affect a family. You may not realise at the time that it is in fact the start of an intergenerational changeover,” he says.

 

An upshot of the recession is that it has put off many next-generation members from taking over the family business, particularly where people saw how hard their parents worked for little return.

 

“We’re helping a lot of businesses with managing changed expectations for the next generation,” says O’Connell. “In other cases we’re seeing sons and daughters stepping in and taking over their parents’ business debts. The scars of the recession are there, but family businesses typically don’t talk about them.”

 

Stewart Dunne, a partner in the audit department at accountants BDO, says there has been a post-recession increase in business handovers, driven by the fact there is more value in businesses, greater economic certainty and larger amounts of money around than in recent years. Causes for concern remain, however.

 

“First, it’s a question of whether there is enough money in a business not just to fund the retirement of the parents, but also whether there will be enough left in the business to ensure it’s viable and has enough working capital,” says Dunne.

 

Second, if parents are looking to take a step back, do the children have the skills required to take over, or will the business need outside professional help? If the latter is required, parents must be “really hard-nosed and commercial” in putting the business first, adds Dunne. If the plan is for children to eventually take over the business, it is important they get experience elsewhere first.

 

“The problem for any family business is that it’s very easy to operate in a cocoon. They might know a lot about their own business, but not about how businesses in other sectors operate, nor even what their competitors are doing,” says Dunne.

 

Bringing in managers from outside may help, but it can be hard to achieve. Owners of family businesses often find it difficult to attract ambitious people because those they seek might fear playing second fiddle to a lesser-qualified boss whose name is over the door.

 

“To attract top talent to a family business you need to incentivise, and you have to realise that a shareholding will more than likely be a part of that,” says Dunne. “Family businesses are often too reluctant to consider giving away a stake to outsiders, even though it can be the best way of attracting the high-performing management required.”

 

Ironically, one of the biggest threats to a business can be the entrepreneurial spirit that established it. Not knowing when to go, or refusing to relinquish decision-making, is the hallmark of what has been termed the “sticky baton” of intergenerational handovers.

 

This was not an issue, however, for Rachel and Frank Doyle, the founders of Arboretum, a Co Carlow garden and retail centre. Their sons, Fergal and Barry, approached the couple with a proposal about taking over the business.

 

The transition was helped by the brothers’ complementary skills, says Fergal. Barry is a horticulturalist who looks after the retail side, while Fergal is in charge of administration and marketing.

 

“We both know what is required of us. Our parents let us make our own successes and mistakes,” says Fergal.

The original business has grown as a result, and the brothers have opened a second outlet in Kilquade, Co Wicklow.

“At some point the older generation has to give that level of trust when it comes to the decision-making, and let us get on with it,” says Fergal.

 

 

 

 

 

 

Source: Sandra O' Connell, The SUnday Times Newspaper.