BUSINESS PARTNERS - Navigating the pitfalls of handing a business over to the next generation
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GUEST – Arnold February - Regional Investment Manager at Business Partners Limited
The dream of many business pioneers is not just to accumulate wealth for themselves, but for their business to outlast them and to provide a source of wealth and pride for their descendants.
Yet it is striking how few multi-generational businesses there are in South Africa, says Arnold February, regional investment manager at Business Partners Limited. He estimates that perhaps about one in a hundred owner-managed businesses are in the hands of the third generation, if not fewer.
Another remarkable feature of multi-generational businesses is that the first handover of the business from the founder to the second generation seems to be the most difficult, which explains the scarcity of truly multi-generational businesses in South Africa, says Arnold.
It is a complex phenomenon with many factors, which has mostly to do mostly with the fact that the life experience of founders is usually different to that of their children.
Building a business from scratch is diabolically difficult, which tends to amplify characteristics such as thrift, grit, drive, and opportunism, and develops a deep understanding of how money works in the founding. The second generation, however, are often shielded from these forces, grow up in gentler circumstances, become highly educated and develop different attitudes towards money and how to make it.
The handover between the first and second generation is therefore usually filled with clashing personalities and approaches. Therefore, a successful intergenerational handover is not something that happens spontaneously. It is a process that requires a lot of forward thinking, says Arnold.
The dream of many business pioneers is not just to accumulate wealth for themselves, but for their business to outlast them and to provide a source of wealth and pride for their descendants.
Yet it is striking how few multi-generational businesses there are in South Africa, says Arnold February, regional investment manager at Business Partners Limited. He estimates that perhaps about one in a hundred owner-managed businesses are in the hands of the third generation, if not fewer.
Another remarkable feature of multi-generational businesses is that the first handover of the business from the founder to the second generation seems to be the most difficult, which explains the scarcity of truly multi-generational businesses in South Africa, says Arnold.
It is a complex phenomenon with many factors, which has mostly to do mostly with the fact that the life experience of founders is usually different to that of their children.
Building a business from scratch is diabolically difficult, which tends to amplify characteristics such as thrift, grit, drive, and opportunism, and develops a deep understanding of how money works in the founding. The second generation, however, are often shielded from these forces, grow up in gentler circumstances, become highly educated and develop different attitudes towards money and how to make it.
The handover between the first and second generation is therefore usually filled with clashing personalities and approaches. Therefore, a successful intergenerational handover is not something that happens spontaneously. It is a process that requires a lot of forward thinking, says Arnold.
