Less than 1 in 3 businesses are transferred to the next generation successfully and even fewer in Cyprus
of Mario Lukaides*
A common response from family business owners when asked the above question is “Let's make an offer and we'll see.” If asked what the business is worth there is usually no answer. Most owners are emotionally attached to their businesses. They like to be offered to sell but as a compliment rather than an honest intention to sell if the right price is found. It is very difficult overnight to lose your identity, purpose and accompanying recognition no matter how good the price. Let alone that sometimes too much money can be a problem. Yes you read that right, for people who lived humbly and the bulk of income was invested in the business, the sudden influx and management of large sums of money in the household would not be so easy.
The possibility of selling should be always in the options even if it is not a desire.
We recognize that all business founders have some common characteristics such as hard work, vision and determination. Another common characteristic of all founding entrepreneurs is the need to one day transition to succession, both in terms of ownership and control of the business. For most, the goal is to pass both ownership and control to the next generation, i.e. their children, which is not always possible. Succession and retirement are not pleasant activities, they remind us that we are not immortal and bring us one step closer to death. They deprive us of our identity as well as the power that the post carries. So they prefer to be forgotten in everyday life with hard work and functional business issues, not daring to face reality.
Who and when will be the next owner of your business is a significant change that takes time and effort that most of us unfortunately ignore (75% of family businesses worldwide do not have a succession plan. So less than 1 in 3 businesses are transferred to the next generation successfully and even fewer in Cyprus.
Now while we are talking about succession with priority to the next generation have we ever wondered if we should sell our business? This question is unfortunately rarely entered mainly for emotional and ME reasons. Most owners claim that they built the business for their children and so a potential sale is considered a failure. But the reality is that they made it for themselves, their personal identity and EGO, even if they didn't enjoy the fruits of their creation as much as they should have. Their success, which was the result of many efforts and difficulties, is the responsibility of future generations to recognize.
The possibility of selling should always be in options even if it is not desired. We should always know the value of our business and constantly work to increase it, so that if we ever want to sell it, we are ready. At the same time, we are building the foundations to overcome the obstacle of emotional identification with the company so that if the conditions offer it, we will be more ready to take the big step. In addition, with this approach there are measurements of the company's progress and there is no next generation with a company in debt and the previous one complaining that it handed over a successful business (counting only the turnover) and the new generation destroyed it. Finally, we may decide that only one or some of the descendants will take over the business, perhaps those who work in it and the rest will be given corresponding wealth. Knowing the value of the business helps to do this more easily and objectively. Also, if there are data from corresponding companies in the sector, how do we compare and what are we doing to improve? Knowledge and transparency can only bring improvement.
Some reasons why the possibility of sale should be in the options of a family business are:
– There is no next generation
– The next generation is not interested or interested in other things
– The next generation cannot manage the business with increased risks for the business and the family< /p>
– The next generation is scattered all over the world
– The next generation is numerous and impossible for the business to absorb the whole family
– The family decided to focus on other areas
– The business sector is sick
– Economic conditions favor the sale
– An opportunity was found that we believe will not repeat
– Analysis and introspection to assess the value of the business is a useful tool for a different perspective. The sooner we assess the value of the business, the sooner we can take corrective measures. It is not very different from preventive medicine, with the analyses, cardiographs and fatigue tests.
The economic climate in Cyprus today shows a lot of interest for acquisitions in several sectors and little for sales. If the term Supply and Demand applies (I see no reason why it shouldn't) then the economic conditions lend themselves to being ready for the possibility of selling. In the first stage, I recommend the use of specialized consulting services, thus getting an external opinion on our company. The excuse that we don't have time now for ….1000 reasons is not enough.
*Mr Loukaidis is the founder of Synpraxis Management Services
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