Kuala Lumpur, 7th August 2019 – Running a business is tough, but the transition a business has from one generation to the next generation is even tougher. Internal conflicts, family matters, and business concerns make ownership transition very complicated and is often emotionally charged.
MasteryAsia, on 27th July, hosted the first ever family business convention ‘The Asian Family Business Convention 2019’ to help family business owners better manage common family business challenges in Asia. Through this convention, the company introduced their never before seen Quest Family Business Advisory Services to Malaysian family business owners assembled.
The Asian Family Business Convention 2019 is first of its kind in Asia, aims to discuss the challenges frequently faced by family businesses in Asia and to educate family businesses on how to deal with these challenges so that their businesses will continue to experience growth and success through generations to come.
More than 200 attendees attended the convention, with diverse entrepreneurial backgrounds, in order to obtain more insight regarding succession planning for their businesses.
In his opening keynote speech, Mr. KC See, Chief Executive Officer of Quest Group of Companies said, “Every founder’s dream when they start their business is to have their children take over, especially in Asia. But that is not happening as much as it used to be due to the numerous challenges they are facing now.”
“The challenges include children not willing to take over their family business, some children are obligated to run the family business but their parents are not willing to let go of their control, disagreements among siblings and some business owners don’t have succession plans,” added KC.
The convention was helmed by the best-selling New York Times author and award-winning speaker, Dr Tom Deans, best-selling author and the New York Times Top Ten Books Business Owners Should Read book “Every Family's Business”: -12 Common Sense Questions to Protect Your Wealth.
With his deep industry knowledge and expertise, Dr Tom Deans was invited by MasteryAsia to share his perspective and experience related to the complex topic of family business. Leveraging on his expertise, Quest MasteryAsia Group has set up Quest Family Business Advisory Services in Malaysia.
Silence is the Great Destroyer of Family Wealth
Dr. Tom Deans highlighted the biggest challenge of transitioning a business to the next generation is that most business owners not willing to talk about transition of equity (voting shares) to their family.
“When the family leave this subject in silence, they will also leave the next generation to make assumptions on who gets what, when and how. This will destroy the family and family businesses,” explained Dr. Tom Deans.
It may not only open up internal conflicts among family members, but it will also destroy the business that took years to build in very short of period.
He said, if the business owner doesn’t have a conversation about business transition with their family, the shares will transition automatically to the family after they die.
The children who are not prepared to join the company don’t have the relationships with the bankers, customers and employees of the business. Then, the customers relationships unravel, key employees leave because they get nervous.
“What has taken the founder use many years to build a business can be de-valued itself quickly. The business might end up selling to competitors for pennies on the dollar because the family don’t talk about ownership transition,” added Dr. Tom Deans.
Research conducted by PricewaterhouseCoopers (PwC) Malaysia found that close to 90% of Malaysian family businesses encourage family members to work in the
business, and 80% of Malaysian family businesses have the next generation family members working in the business.
However, family businesses in Malaysia lack strategic succession planning. The research showed that only 23% of Malaysian family businesses have a robust, formalized and communicated plan.
The reason that many family businesses in Malaysian do not see the necessity for solid legacy planning is because many founders of family business in Malaysia assume that their children will succeed them but fail to have open discussions about each party’s expectations. This often leads to internal arguments between family members about various issues like how the business should be run, the degree of involvement in the business of certain family members, the level of commitment of each family member and many more. Problems also arise when business owners rely too much on the direct transfer of assets to pass on their wealth and ownership to their children when they may not necessarily be the best or most competent people to take over the business.
Aware of these problems, MasteryAsia recognizes that these enterprises are the bedrock of the country’s economy. The Asian Family Business Convention 2019 will not only educate family businesses on legacy planning but will also address how these families can maintain good governance and a strong foundation while highlighting the challenges most commonly faced by family businesses.
Additionally, through Quest Family Business Advisory Services, family businesses will receive guidance in designing strong governance structures which will promote their continuity, developing policies to support effective decision making and communication, being educated in making strategic succession plans and leadership development, conducting effective generational transitions, preparing successors to take over and many more through its Certified Family Business Advisors.
“Family businesses in Asia are facing numerous challenges. We would like to help them in forming strong foundations in succession planning and intergenerational wealth transfers. Ultimately, we would like to see these promising enterprises have sustainable
legacies and experience success through open communication as well as smooth transfers of wealth from generation to generation,” explained KC See.
Quest Family Business Advisory Services’ mission is to help family business owners to be better equipped to prepare their heirs for succession, to anticipate and manage any challenges that they might face and to make strategic plans- all of which will ensure the longevity of their businesses.