Large corporations known around the world, small and medium-sized companies and the most diverse business and management models. Family businesses, in which the majority of the capital is in the hands of the family and whose members are involved in making strategic decisions, are one of the great pillars of the national economic fabric.
According to the Family Business Institute, in Spain 89% of private companies are family-owned, they generate 67% of private employment and contribute 57% of the sector’s GDP. In the case of Catalonia, the portrait is similar. The Catalan Family Business Association (ASCEF) points out that these companies, which make up 88% of Catalan private companies, promote up to 76% of private jobs. However, when we talk about the very survival of these companies, we find that only one in ten survives to the third generation.
“Business continuity for future generations is the main strategic objective of family companies,” stated the Family Business Observatory for May 2021, prepared by the consulting firm Deloitte. This objective comes before increasing market value or profits. However, “only 13% of families recognize that they have any succession plan and only 16% have it in writing. We are procrastinators by nature,” explains Belén Alarcón, partner and director of Wealth Advisory at the independent financial entity Abante.
In family organizations, future and present go hand in hand. Thinking otherwise is one of the most widespread false beliefs. “Succession planning does not have so much to do with what will end up happening in the future with the company, but rather with the fact that the decisions made in the short term will end up substantially conditioning the company’s own ability to survive,” says Pablo Márquez de Prado. , partner and director of Corporate Consulting at Abante. In fact, succession will make the difference between the survival or not of the company in the medium and long term.
When planning succession and before making any decision, there is one factor that family businesses cannot ignore, and that is their composition by its very nature. In this type of organizations, antagonistic systems coexist with different interests that must be understood and communicated to guarantee the viability and future of the company. These systems are the company, the family and property. Thus, for the family, relationships and emotions weigh heavily, while, for the corporation, the most important thing is the viability of the business and the generation of profits.
“The complexity lies in managing very divergent interests. In many cases, it is not that there is no intention to solve things, the intention generally exists, but sometimes there are family members who, generally, due to lack of training, do not have the tools to know how to put themselves in the other’s place.” comments Alarcón. The key is to make good decisions without forgetting that, from the outset, all those involved must do their part, understand that they will have to give in on some aspects, and work focusing on the same thing: the continuity of the company.
Many steps must be taken during the succession process. Abante experts insist on the importance of training as a starting point without forgetting the involvement of everyone. “The outgoing generation has to take charge and get involved, develop a protocol and sign certain minimum agreements,” highlights Márquez de Prado, who also insists on professionalizing the company’s management so that the incoming generation does not encounter a regime of informal relations. already established and complex to modify.
The objective will be to draw up a global strategic plan both so that the company is profitable and so that the different interests of all the people who are part of the family business can be addressed. Communication and the definition of new roles should also be part of the succession process. “You have to explain internally what you are doing and externally give honors to the new generation. If the father or mother continues to be called, this succession will have been paid lip service, but it will not have come to pass,” advises Márquez de Prado.
However, it will be necessary to understand that in the new stage of the company there will also be uncertainty and moments of crisis. “We have to be realists. Not everything always has to happen as we had planned. We will have to adapt to the circumstances,” says Márquez de Prado. But being realistic is not contrary to preparing. “Family businesses that have been successful have been formed, have shared a vision, a mission and values, have planned succession and have professionalized the family and a culture has been generated,” summarizes Alarcón. Although there is no single formula for everyone, there is the same path to follow: address succession now if you want to persist.
If managing generational change is important to guarantee the future of family businesses, understanding that new generations think differently is also important. There are many family businesses that over the years choose to change their activity, diversify their business lines or invest in other companies. It is when we talk about business families that choose to create new corporate and property structures to channel these investments and maintain the family part and move away from the traditional business.
Family groups, family offices, venture capital companies (SCR), family businesses in transition or business families that jointly invest assets. The case may be different, but, in all cases, a global analysis of the family, business and financial situation will be necessary, and expert and independent advice that looks beyond the tax part. Investments in venture capital companies are exempt from the Wealth Tax – under a series of conditions – but beyond this tax part, it is necessary to determine how this figure and the private equity investments that are made within the structure fit. business and property.
For Carlos Bach, partner and commercial director of Abante in Barcelona, ??before creating a company or vehicle and deciding to make alternative investments, companies and family groups must carry out an exercise of strategic reflection on the own objectives of the members of the company. family as well as the company’s objectives. “It is essential that estate and tax planning go hand in hand with the Complete and Individual Future Plan of each member of the family structure. Doing this entire process in a global and orderly manner will help make good decisions in the present, guarantee the future of the company and know what can happen when others take the reins,” says Bach.
