One of the key aspects of Australians' financial planning is deciding how to take care of a family business. This issue affects more Australians than might be though at first glance. According to MGI, family businesses employ more than 60 per cent of Australia's total workforce, giving some idea of the size of the sector.
According to the KPMG and Family Business Australia Family Business Survey of 2013,
These family businesses represent many things. On one hand, they're a basic expression of the desire to pass something onto the next generation, along with creating a personal legacy. However, more obviously, family businesses are also a financial tool.
In their book Tax and Financial Planning for the Closely Held Family Business, Gary A. Zwick and James Jurinski cite a survey of family business owners conducted by Arthur Anderson from the 1980s, asking them why they wanted to pass their businesses on to family. Most of the participants responded that ownership of a family business would give their children financial freedom, as well as the ability to steer their own financial futures.
This suggests not only the importance of family businesses for maintaining a strong financial outlook, but also the essential nature of quality succession planning.
Family businesses must prioritise succession planning
The FBA says that family businesses generate a total of $4.3 trillion worth of wealth annually. This significant sum by itself is enough evidence that proper succession planning is a key aspect of wealth management for families. Unfortunately, all too many Australian family businesses give the issue of succession planning short thrift.
A recent survey from PwC revealed that only a staggering 16 per cent family businesses worldwide have a robust succession process in place. This despite the fact that the FBA lists "Choosing a suitable ownership structure for next generation" as one of their "Top 5 issues for families in business".
A financial adviser such as Centric Wealth can help implement a succession plan for your family business, to help ensure your family remains financially independent long into the future. Our Family Office service can deal with these and other issues.