The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Succession planning is critical for the sustainability of family-owned businesses and the overall economy, a senior Bahamas-based KPMG executive noting that these companies accounted for about 70 per cent of the private sector.

Simon Townend, partner and head of KPMG Corporate Finance in the Caribbean, said family-owned businesses with the right governance structures were generally more productive.

Speaking with Tribune Business following a seminar hosted by KPMG on family business succession planning, Mr Townend said: “Family succession planning is critical, and I would go as far as to say it’s important for the economy, because family businesses underpin most economies.

“Seventy per cent of most private companies are owned by families. When families are working together, and there’s harmony and they’ve got governance structure in place, the companies become much more productive and that all rolls into a stronger economy.

“You’re not going to have perfection; not every family is going to get along, and you’re going to lose some businesses. From KPMG’s perspective, many of our clients are family businesses, so it’s very important to help them succeed.”

Mr Townend estimated that 40 per cent of KPMG’s Bahamian clients were family businesses. “The family business can be in all sizes,” he explained.

“You can have your two-man or one person family businesses, or you can have your very large business, so there is quite a range and not all of them come to us, but it is a good percentage so, it’s very important to us.”

Mr Townend added that family succession planning does not have to be a costly process. “All you need is the right third party. If they find it difficult bringing up these issues with each other, you have someone like Grant (Walsh) who can come down and talk to each person and make sense of it; it’s not exactly rocket science, it’s just a matter of getting the structure in place,” he said.

“It’s important to have a family council separate from your business Board, and once you have that separation you can manage both. It doesn’t cost a lot of money; it just takes time to get it done,” said Mr Townend.

He added that dealing with family succession planing early can help to avoid a business collapse in the future. “The worst case is where there is a fall out and it destroys family relations, and that happens because as you accumulate wealth and you have more family involved, the family element gets lost and people begin to fall out,” Mr Townend said.

“That’s really what you are trying to avoid, and that can be managed if you start on the road to managing that early. You wouldn’t lose businesses. If you spend your whole life as a family fighting about the business, you aren’t focused on the business. You would be seeing your business deterriorate because you spend more time fighting and less time focusing on the business.”

Lester Cox, market head of business banking at Royal Bank of Canada, told Tribune Business: “From a succession planning standpoint it’s important that families plan it. If you want to sustain the business you really have to make sure that you transition from generation to generation.

“It’s really important to address it. A lot of businesses don’t talk about it because it is difficult sometimes to talk about who you are giving ownership to, and why you are giving it to one and not to the other. It’s not the most comfortable thing to talk about, but it’s a reality for businesses when you want to think about continuity.”