FROM humble beginning in 1993, Cheng & Co has been serving SME clients for more than 25 years. We have observed that family-owned businesses are among the most common in Malaysia at an estimate of 80%. As a family business grows bigger and stronger, it also becomes the biggest asset of the family.
SUSTAINING A FAMILY BUSINESS AND WEALTH IS VITAL WITH INTERGENERATIONAL SUCCESSION PLANNING.
In the book of Wealth Doesn’t Last 3 Generations by Jean Lee and Hong Li, the authors addressed the issues faced by most family-run businesses – the tragic cycle of wealth disappearing in three generations. Proportions of family-owned companies have become significant to Malaysia’s economy, contributing more than 67% to the country’s GDP. Long term success and survival of family businesses will significantly depend on strategies and governance decisions taken by entrepreneurs in their power transfer, management, employment and internal relationships.
According to the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) Family Business Survey report 2018, only 23% of Malaysian family-owned businesses are ready with a robust, formalised and communicated succession plan in place.
BUSINESS SUCCESSION IS CRUCIAL BUT IS OFTEN NEGLECTED BECAUSE IT IS CONSIDERED TO BE A SENSITIVE TOPIC OR OF LESS URGENCY.
An improper business succession plan may lead to following consequences:
- Owner may fail to realise the full value of the business during the exit process.
- Successor may lack proper skills, training and education.
- Successor may cause serious disruption to the business and put the business at risk.
- New heirs may not work well with the remaining partners of the business.
- Potential successors such as senior management, family members or outsiders may be isolated.
- Disputes among-stakeholders may lead to the liquidation of the business.
Business succession planning of a family business often has the long-term goals to:
- Protect the business as the most important family asset
- Ensure the business stays in the family
- Create a legacy for the family
When the ownership of a business involves other non-family members, business succession planning becomes even important due to the following:
- Preserve the Value of the business in the event of death, disability or critical illness of a partner
- Ensuring Business Continuity without unwanted distractions
- Protect the Business Interest of remaining Partner(s)
- Protect the Financial Interest of affected Partner(s)
Business Succession Planning is one of the governance services provided in the CC Family Office’s core services framework. CC Family Office is dedicated to helping aspiring individuals and families to achieve peace of mind in their family wealth management and lifestyle planning.