6 in 10 family businesses in Singapore not ready for succession

And 56% do not intend to hand over control of their business at all.

According to a release, preparing and training a successor is the most important challenge facing family businesses in Singapore. This is according to a newly released joint report by CPA Australia and KPMG titled Family Business in Singapore, which also reveals that less than half of the 41 family businesses surveyed have concrete succession plans.

Other key concerns for these enterprises also revolve around succession and include choosing the right successor, and maintaining family control of the business.

Mr Melvin Yong, General Manager at CPA Australia in Singapore said: “We have observed that many family businesses do not have a clear succession strategy. In fact, many businesses do not  have formal succession plans, with the would-be successor getting trained only when into the job.” Another interesting finding of the survey was how family businesses consider their governance frameworks optimal despite the lack of external controls.

Mr Owi Kek Hean, Deputy Managing Partner and Head of Enterprise at KPMG said, “From our experience, many non-listed family businesses do not have governance structures in place. Family businesses could feel that their governance framework is optimal because the owner is the one who calls the shots.”

“With such limited external influence, there could be questions about whether family businesses in Singapore are allowing for rigour in their governance and if they are overlooking the added value of non-family members.”

Lack of succession planning
Only a third of survey respondents consider their business to be ready for exit or succession. In addition:

• 66 percent did not have immediate plans to create a succession strategy for ownership of the business
• 56 percent did not intend to hand over control of their business in the immediate future.

Mr Owi said that willingness to let go of the business is a challenge for family enterprises in Singapore, “Founders often want to remain working in the business for as long as they are able to. This becomes a challenge for successors or business owners as they are unable to fully take control of the business.”

Trust issues exacerbate this situation, said Mr Yong, “We believe that successors should be groomed early. This helps to ensure that the next generation has time to learn as more senior family members are around to guide the process.”