Family Businesses play a critical role in the Asian economy, comprising over 60% of all firms in Singapore. According to recent studies, the percentage of family-owned businesses in Singapore is expected to grow within the next two years and at a rate higher than the global average.
Succession Planning plays a crucial role in the success of family businesses. When they are successfully passed on to the new generation, one can expect steady growth and rise. Failed family business successions can lead to disastrous results.
A clear example of this is the recent feud between late president Ong Teng Cheong’s sons Ong Tze Guan and Ong Tze Boon. Both brothers are now involved in a legal dispute over the father’s inherited architecture firm.
Ong Tze Guan is suing his brother Ong Tze Boon and six other shareholders of Ong&Ong Holdings and the company itself by claiming that his shares in the family business were highly undervalued when the defendants forcibly acquired them.
Mr Ong Tze Guan is seeking the high courts’ declaration, stating that the transfer of his shares will be rescinded. The defendants will be ordered to purchase their shares at a price agreed on or fixed via a court-appointed independent expert.
The feud has garnered massive public attention, and the civil case is currently at the pre-trial conference stage. Mr Ong Tze Boon is recovering the loan balance and suing his brother for libel due to the allegations of minority oppression in a counterclaim.
The above situation of brothers ruthlessly suing one another is a classic example of failed family business successions.
This blog will help you avoid such unfortunate situations by stating the most common family business succession mistakes.
Mistake # 1: Delaying Succession Planning
A common mistake family business owners commit is delaying succession planning until they reach retirement age, suffer from illnesses, or face unforeseen circumstances. It will be too late to start planning when things already happen. It is extremely crucial to create a solid business succession plan early and make necessary adjustments later on.
A solid plan ensures that every key business member, along with your family members, knows their roles, responsibilities and what is expected from them.
Mistake #2: Excluding Children from Strategic Planning
Mutual understanding between two generations or even more is highly vital when drafting a successful business succession plan. Your children and grandchildren might be actively involved in all business activities. But do they thoroughly understand the intricacies of your business and have an opinion on creating a succession plan.
You must have a clear idea of which family members are interested and not when running a family business. It is why it is beneficial to include children in strategic planning as they have a more significant stake in its future. You must involve them in strategic planning from the beginning.
Mistake #3: Assuming Business Runs In The Family
Remember, Business acumen is not genetic. One of the biggest mistakes family business owners make is assuming that their children/grandchildren are interested in running the family business and burdening them with unwanted responsibilities. Attitudes are changing today, with the younger generation wanting to explore new career opportunities.
For prosperous succession planning, it is critical to understand which family members have the potential, share business running aspirations, respect one’s wishes, and choose the most suitable person for the CEO position.
Mistake #4: Confusing Personal Ties With Professional Ones
Family ties should never muddle up when running a business. It is why we should keep emotions and personal relations aside when planning family business successions, as it can result in cloudy and partial judgments that can threaten and hamper business growth.
Ensure to analyse every family member’s business potential and qualifications beforehand and choose a fit and ideal candidate for business growth. It necessarily doesn’t have to be a family member.
At, times outsiders such as employees working under you show great potential too, which your family members fail to deliver. Remember, your goal is to have a successful business across generations to come, so think strategically, not emotionally.
Mistake #5: Playing Favorites
Every family has an ideal child, one with great potential, excellent business skills and aptitude. However, it does not mean that you ignore other children and assume that they are uninterested in the business.
Other children might expect an equal say in the company and an equal profit share. All children cannot contribute equally to the business. You should fairly compensate every child for the services they offer.
A common problem arises when a parent cannot decide which child should be in charge. It is when succession planning plays a significant role.
The succession planning process should expose your children to various business management facets that make you see which one displays the best qualities and can lead the company in the future.
Business Succession Planning Singapore: Lighthouse Legacy Planners
It is essential to invest in succession planning in Singapore for family businesses to prosper and grow in the long haul. A long term succession planning strategy ensures business sustainability for generations to come apart from being extremely profitable.
Our consultants at Legacy Lighthouse assist you in creating a successful business succession plan that safeguards your business and prevents it from a fatal and unfortunate collapse.