Less than 30% of family businesses survive the second and third generations due to a lack of foresight and planning
Family businesses are highly consolidated businesses with an upward trend within the Spanish economy and constitute the largest percentage of the Spanish business fabric, significantly supporting the country’s economy, which is why their succession forecast is necessary. In fact, according to the Legal Circle of Barcelona, it is estimated that less than 30% of family businesses survive to the second and third generation, a figure that is particularly affected after the COVID-19 epidemic.
Antonio Pastor, lawyer and partner of Crculo Legal Barcelona, points out that some of the main problems hindering the long-term success of these companies are “the lack of foresight and succession planning of companies”. “Normally it is difficult to transfer the principles, values and corporate philosophy that the Patriarch instilled in his successors from the start,” Pastor adds. The arrival of new faces in a business can lead to a dissipation of the methodology that has led to its success over time.
Tools for a successful succession process
Faced with the objective of preserving intact a corporate heritage, there are several instruments to carry out an orderly succession. From Circle Legal Barcelona, they stress the importance of implementing family protocol and due diligence.
Making a family protocol is an essential tool to be able to keep the core business unscathed. “This document reflects the values and philosophy of the company, the conditions of access to it, the functions that the members of future generations will exercise, and, similarly, a system of operation and internal discipline”, explains the partner of Circulo Legal Barcelona. This instrument is responsible for ensuring the legal security of the members that make up the company, since it includes documents such as wills or partner agreements. The objective is clear, to offer the necessary transparency to be able to watch over the family business.
However, Antonio Pastor, assures that another essential tool to carry out a correct succession process is to carry out Due Diligence. “It is a preventive instrument which reflects the legal and economic situation of the company.” The prior character that characterizes this document offers that a good starting point can be established and obliges the successors of family businesses to develop a plan to improve the obligation and economic status of their business.