Late July, I had the privilege of visiting Osaka and Tokyo, where I engaged with several family-owned businesses as part of my ongoing research into the Japanese succession model. For the last 20 years, I have been fascinated by how family-owned businesses in Japan have thrived using their model of succession, adoption, and stewardship, their "do well, do good, do right" ethos, and their powerful concept of "beyond self." These businesses offer invaluable insights that can benefit family enterprises operating in Asia and the West. In Japan, family businesses are more than just economic entities; they are vessels of heritage, culture, and long-term vision. The concept of long-term, generational succession is deeply rooted in Japanese society, and this practice has allowed many Japanese companies to thrive across centuries. A key factor in the endurance of these businesses is Japan's historical period of isolation, which effectively preserved traditional values and practices from external influences for almost two centuries. The Edo Period: A Time Of Preservation And Continuity Japan's isolationist policy, known as Sakoku, was enforced during the Edo period from 1603 to 1868. Under this policy, Japan closed its borders to most foreign influences, with very limited exceptions. This period of isolation allowed Japanese society to develop and maintain its cultural and economic practices with minimal outside interference. For nearly 265 years, Japanese businesses operated within a stable and controlled environment, free from the pressures of rapid industrialization and Western influence that were sweeping across much of the world. This isolation played a crucial role in the formation of a distinct Japanese approach to business and succession. With a strong emphasis on family continuity and the preservation of values, Japanese businesses were able to build solid foundations that could withstand the test of time. The absence of external pressures meant that these businesses could focus on long-term planning and the gradual, deliberate transfer of leadership across generations. Legacy Brands: A Testament To Generational Success Many of Japan's most renowned companies are not only family-owned but have also been passed down through multiple generations. This commitment to family succession has helped these businesses navigate the changing tides of market conditions and global economic shifts. Suzuki Motor Corporation : Founded in 1909 by Michio Suzuki, Suzuki started as a loom manufacturer during the silk boom. Over time, it evolved into a global automotive giant. Despite the industry's volatility, Suzuki has remained under the control of the Suzuki family, with current CEO Osamu Suzuki being the fourth adopted son to lead the company. His leadership has been instrumental in propelling Suzuki to global prominence. Toyota Motor Corporation : Perhaps the most famous example of a family business turned global powerhouse, Toyota was founded by Kiichiro Toyoda in 1937. The Toyoda family has maintained a strong influence over the company, even as it grew into one of the world's largest automobile manufacturers. The succession of leadership within the Toyoda family has been carefully managed, ensuring that the company's core values and long-term vision remain intact. Kikkoman Corporation : With roots dating back to 1603, Kikkoman is a prime example of how family businesses can endure for centuries. The company, formed through the amalgamation of eight family businesses in 1917, has maintained its leadership within the global soy sauce market. Each generation of leadership has carefully upheld the company's reputation for quality and innovation, ensuring its continued success. Japan's historical period of isolation, combined with its deeply ingrained cultural values, has created a unique environment where family businesses can thrive. The deliberate and thoughtful approach to succession, combined with a focus on long-term stability and the preservation of family legacy, has allowed these businesses to endure and prosper for centuries. As we continue to explore the Japanese model of family business succession, these lessons offer a valuable blueprint for family enterprises worldwide. "Better to Have Daughters than Sons, for then I can choose my Sons" This Japanese proverb underscores a profound and strategic approach to succession planning that has been instrumental in the longevity and stability of Japanese family businesses. Traditionally, male offspring are the preferred heirs in family-run enterprises. But what happens when there is no male line to continue the legacy? In a unique approach to succession the Japanese adopt the Mukoyoshi practice—a uniquely Japanese approach with universal lessons. This tradition allows families to adopt adult males, often sons-in-law, to carry forward the family business. It’s a strategy that ensures the selection of a capable and committed leader, regardless of bloodline, to sustain the enterprise across generations. The Origins Of Mukoyoshi: A 1,300-Year Legacy The Mukoyoshi practice has roots that stretch back over a millennium. In AD 717, the god of Mount Haku visited Buddhist monk Taicho Daishi in a dream, instructing him to find a hot spring in the village of Awazu, in today's Ishikawa prefecture. Daishi discovered the spring and instructed his pupil, Garyo Hoshi, to build a guest house there. Garyo Hoshi, in turn, adopted a son, Zengoro, to continue the legacy, establishing what is now the world’s oldest family business—Hoshi Ryokan. For nearly 1,300 years, this hotel has been passed down through 46 generations, often through the adoption of capable heirs when necessary. This tradition of adopting successors has been a pragmatic solution to a common challenge: ensuring the survival and success of the family business in the absence of a biological male heir. As Mariko Fujiwara, a sociologist at the Hakuhodo Institute of Life and Living, explains, "If you did not have a capable son to succeed, you would try to find a more capable man to marry one of your daughters. It was a very pragmatic decision for the family business to survive." Japan, with one of the world’s highest adoption rates—over 80,000 annually, predominantly adult men in their 20s and 30s—has seen an entire industry evolve around providing suitable candidates for family businesses in need of an heir. Mukoyoshi In Practice: Strategic Succession Beyond Tradition The Mukoyoshi practice is more than just a cultural tradition; it is a strategic business decision that allows families to handpick successors from a broader pool of candidates. This flexibility has been a significant advantage in maintaining strong leadership within family businesses, ensuring that the values and mission of the business are preserved across generations. Toraya Confectionery : Founded in the early 16th century, Toraya is one of Japan’s oldest and most prestigious confectionery companies. When no suitable male heir was available, the Kurokawa family adopted a son-in-law who demonstrated both business acumen and a deep understanding of the company’s values. This strategic decision allowed Toraya to maintain its leadership in the luxury confectionery market, renowned for its traditional Japanese sweets (wagashi). Suntory Holdings : Founded in 1899 by Shinjiro Torii, Suntory is one of Japan’s most iconic beverage companies. Over the years, the company has been led by several generations of the Torii family, with the occasional adoption of a son-in-law to ensure strong leadership. This strategy has allowed Suntory to expand globally while maintaining its commitment to quality and innovation. Lessons From Mukoyoshi For Global Family Businesses The Mukoyoshi practice, while uniquely Japanese, offers valuable insights for family businesses worldwide. It demonstrates the importance of flexibility and strategic planning in succession, ensuring that leadership is not solely determined by birthright but by capability and alignment with the family’s values and vision. For family businesses facing similar challenges, the Mukoyoshi model offers a blueprint for success—one where the continuity and prosperity of the business are safeguarded by choosing the most qualified individuals to lead, whether they are born into the family or adopted into it. About the Author - Enrique M. Soriano is a Senior Advisor for the Wong Advisory Group and this article has been republished with his permission. Find out more by visiting their website here

In recent years, the term 'silver tsunami' has gained traction among demographers, economists, and policymakers. It vividly describes the rapid ageing of the population, particularly in developed countries, and the sweeping impact it is poised to have on various facets of society. As we delve into the intricacies of this demographic shift, it becomes clear that the silver tsunami is not just a metaphorical wave but a profound reality with wide-ranging implications for the world as a whole, including the world of family business. The silver tsunami refers to the significant increase in the proportion of elderly individuals within the population. This phenomenon is primarily driven by two factors: increased life expectancy and declining birth rates. Advances in healthcare, nutrition, and living standards have allowed people to live longer lives, while a combination of cultural, social, and economic factors has led to smaller family sizes. The ageing trend is most pronounced in developed nations, where the post-World War II baby boom resulted in a large cohort of individuals now reaching retirement age. According to the United Nations, the global population aged 65 and older is projected to double from 703 million in 2019 to 1.5 billion by 2050. In countries like Japan, Germany, and Italy, the median age is already approaching or surpassing 50, and the United States is not far behind. The silver tsunami presents a complex economic landscape. On one hand, an older population can strain public resources, particularly in healthcare and pension systems. Governments face increasing pressure to fund social security programmes, leading to potential budget deficits and increased taxation. Healthcare systems must adapt to the higher prevalence of chronic diseases and the need for long-term care, potentially driving up costs. On the other hand, the silver tsunami opens new economic opportunities. The 'silver economy' encompasses products and services tailored to the elderly, ranging from healthcare innovations and senior-friendly housing to leisure activities and financial planning services. Businesses that cater to this demographic can tap into a growing market with significant spending power. Moreover, many older adults continue to contribute to the economy through part-time work, volunteering, and caregiving, challenging the traditional notion of retirement. The ageing population is also transforming the social fabric. Traditional family structures are evolving as multigenerational households become more common. Grandparents are increasingly playing crucial roles in childcare, allowing younger generations to pursue careers. However, the burden of caregiving can also lead to intergenerational tensions and financial strain. Culturally, societies must grapple with shifting perceptions of ageing. Ageism remains a pervasive issue, with stereotypes about the elderly influencing everything from employment practices to media representation. Combatting ageism requires a concerted effort to highlight the contributions and potential of older individuals, fostering a more inclusive and respectful society. Preparing for the Wave Addressing the challenges and opportunities of the silver tsunami requires comprehensive and forward-thinking strategies. Policymakers, businesses, and communities must collaborate to create environments that support healthy and active ageing. Key areas of focus include: Healthcare Innovation : Investing in preventive care, telemedicine, and age-friendly medical infrastructure can help manage the increased demand for healthcare services. Pension Reform : Ensuring the sustainability of pension systems through reforms that may include raising the retirement age, promoting private savings, and encouraging longer workforce participation. Lifelong Learning : Providing opportunities for older adults to continue learning and developing new skills can enhance their employability and quality of life. Urban Planning : Designing cities and communities that are accessible and accommodating to the elderly can promote independence and social engagement. Combatting Ageism : Promoting positive representations of ageing and implementing policies that prevent discrimination based on age. Family businesses, which often form the backbone of many economies, are particularly affected by the silver tsunami. As senior family members approach retirement, succession planning becomes a critical issue. The transfer of leadership to younger generations can be fraught with challenges, including resistance to change, potential conflicts over strategic direction, and gaps in necessary skills and experience. Additionally, older family members may struggle with the decision to relinquish control, complicating the transition process. Successful succession planning requires proactive strategies to ensure continuity, such as mentoring programmes, external advisory boards, and clear governance structures. Moreover, family businesses must adapt to the evolving marketplace, potentially diversifying their offerings to cater to the needs of an ageing population, thereby turning a demographic challenge into a growth opportunity. There may also need to be changes to employment policies as people may want to work longer and continue to contribute to the workplace which may need employment contracts to be revisited and the general work environment may need some changes too. The silver tsunami is an undeniable force that will shape the future of our global society. By understanding and addressing the multifaceted impacts of an ageing population, we can navigate this wave with foresight and compassion. Embracing the silver tsunami not only involves mitigating challenges but also seizing the opportunities it presents, ultimately leading to a more inclusive, dynamic, and resilient world.

Succession planning – could employee ownership be right for your family business? Five million. That’s how many family businesses there are in the UK today, employing more than 12 million people and contributing more than 25% of GDP. These are big numbers, by any measure. Yet equally big is the positive role many have played in their communities for generations, and continue to play today.    So what happens when it comes to succession planning? What if the next generation wants something different – and a trade sale or MBO just doesn’t feel right?   Transitioning to employee ownership (EO) is one option family businesses might consider today. Exploring Employee Ownership As A Succession Option     The UK’s employee-owned sector is currently growing, with more than 1,650 employee-owned businesses around the country, according to EO membership organisation the eoa. Companies who have chosen EO as the way to secure sustainable success in the last 10 years range from household names Riverford Organics and Go Ape to eighth-generation family business Lodge Brothers, which transitioned in January 2024. So What Is Employee Ownership? The clue’s in the name. Put simply, EO is when employees have a say and a stake in the company they work for. Ownership can take a variety of forms – from employees directly owning shares in the company, to having shares held on their behalf in an Employee Ownership Trust (EOT). The EOT model is the most common in the UK. Creating Sustainable Success So why is EO worth considering for your family business? Alex Bloom is a Consultant at Telos Partners, an employee-owned strategic change and advisory consultancy. Together with J Gadd Associates, Telos supports businesses with the leadership, governance and employee engagement aspects of transitioning to EO.  Alex and his team also work with existing EO businesses to embed and accelerate the commercial and cultural benefits of being employee-owned. "Transitioning to employee ownership can safeguard the founder’s legacy while freeing the company to shape its own path," he explains. "It puts the business into the hands of the people who know it best and who, hopefully, also care passionately about securing its sustainable success. Becoming employee-owned is one way a family business can retain and strengthen its culture even when family members are no longer around." Empowering The Next Generation To Lead Having previously worked in and then led his own fourth-generation family business, Alex finds supporting others to explore EO – and achieve a smooth handover of the reins – particularly fulfilling. "I genuinely love it," he confirms. "I’ve seen the impact of succession through my own family business as it passed from my grandfather and his brother to the next generation."  "I’ve seen how a family business can be evolved and strengthened as new generations come on board – and I’ve seen the impact when some family members aren’t motivated to be involved. I’ve also seen the benefit that non-family members can bring." "With employee ownership, it can be very empowering for the next generation (whether family or not) to understand there’s a future for them, with the opportunity to contribute to the direction of the business they now own." Commercially, EO businesses have been shown to be more productive. They also invest more in supporting employee health and wellbeing, on-the-job training and critical benefits like flexible working, according to the findings of the eoa’s Knowledge Programme which was published in 2022. What Should You Do Next?   That’s good to know, but EO won’t be the right path for every family business. So if you’re a founder/owner who’d like to explore it as a succession option, what should you do next? Do your research – the eoa website is a good place to start, as is connecting with other employee-owned businesses to learn from any insight they can share. Seek expert legal and financial advice on the transition process from a trusted professional with EO-specific experience – there are several out there with a sound track record of steering family business clients through this phase to success. Contact Alex at abloom@telospartners.com to find out more about the insight and support Telos and JGA  can provide to prepare you, your leadership successors and your people to make the most of your transition – working with you to shape, embed and accelerate the benefits of being employee-owned.

In today's volatile economic and political landscape, businesses face unprecedented challenges. Inflation, interest rates, supply chain disruptions, skills shortages, and wavering consumer confidence all strain profitability and hinder growth. For family-owned businesses, there can also be the added complexity around the future leadership of the business when the current generation is looking to transition, step back or is considering retirement. These challenges have meant that for many family-owned businesses, plans may have been put on hold since 2019 or even earlier. Owners are now left thinking “what next?” This is especially true when succession may be unclear, either because the next generation are not yet ready for a leadership role or have chosen an alternative route to their career. This can lead to family owners looking to other succession options outside of the family such as through third party investment. For families who are considering selling their business or management teams considering a buyout (or some blend of the two), partnering with a private equity investor to achieve that transition is becoming an increasingly popular alternative to a trade sale. What is Private Equity? Private equity firms raise funds from institutional investors such as pension funds, endowment funds and charitable trusts and use these funds to invest in privately held businesses to create value in a sustainable way. Private equity firms will often take a majority equity stake in a business and are ‘transitional owners’, typically holding their investments for around 5 years before looking for the next home for a business. Businesses under private equity ownership can benefit in many ways, particularly in addressing some of the more nuanced challenges that family businesses can face such as succession plans and decisions on capital investment. How Can Private Equity Investment Help Succession Challenges? Private equity firms can bring a wealth of experience and expertise to the businesses alongside their capital. Key benefits for family businesses include: A clear path for transition - Private equity can help to ensure a smooth transition of ownership and leadership which may be particularly valuable when a family member is looking to take a step back from day-to-day operations or achieve a full or partial realisation of their equity. Private equity firms can assist in developing the existing management team or use their network of c-suite individuals to help bolster the team as part of a transition. Access to capital - Private equity firms can provide access to funding to support continued investment in the business towards the achievement of its strategic growth plan through capital expenditure or targeted acquisitions. Knowledge and expertise - Partnering with a private equity firm can allow a business to access knowledge and skills to develop operations and support the strategic focus. Many private equity firms have considerable resources in-house and can help implement new processes and systems to improve operational efficiency. About The Author: Jon Duffy is an Investment Director at Endless LLP, a private equity investor. At Endless , they like to take a hands-on approach, working with founders and Management teams to ensure the value they have created is protected and there is a smooth transition to new ownership. They offer a solution where the family's legacy remains intact, and the business's growth potential is maximised through access to capital, knowledge, skills and a broader network of business professionals. Endless’ impact is not just to provide capital and investment but also invaluable support and expertise. They have been able to navigate complex due diligence sometimes with limited data and can help to see where the potential lies in creating additional growth and profitability. They can work quickly, with the process often completed in weeks rather than months so that owners and management teams have certainty. They also have the ability to fund deals themselves and are not reliant on external debt providers, another area that can cause delays in transaction processes. Endless has two distinct teams to cater for businesses of varying sizes. Between Endless (investments of £10m - £100m+) and the SME-focussed team Enact (investments of £1m to £10m), they target UK businesses with revenues of £15m to £1bn+ across a variety of sectors. The team at Endless are always happy to discuss how private equity could be part of your succession story. If you would like to talk confidentially to explore whether private equity could be the right home for your business, then please contact them via their website

The exit of your family office team is inevitable. The time to take action is now and preparing now will help ensure a transition that safeguards the wealth and legacy you’ve built, writes advisor Jeff Noble, director of Private Wealth Family Office at BDO Canada LLP. It’s a prevalent, undeniable and universal truth: One day, everyone will exit. Morbid? We think not. Rather, contemplating this fact is liberating, clients tell us. It serves as a power driver for everyone to simply seize the day, carpe diem. For the family office, it serves as the ultimate confirmation to plan today and always be ready for tomorrow. The question is, though, will you be the succession planning architect for your family office, or will circumstances choose for you? Such certainty underscores the importance of intentional thought, meticulous planning and strategic foresight, particularly when it comes to the leadership of your family office. This article aims to challenge family office leaders to embark on the journey of succession, today. Reality Check Most family offices here in Canada are led by a patriarch and/or matriarch. As the family prospered, and wealth continued to flourish, the family office transformed into a complex ecosystem with a dedicated cadre of senior, highly trusted professionals. It is most likely that they have faithfully served in their respective roles for decades. Those leaders are now finding themselves on the precipice of retirement. Some may even feel “stuck,” as the absence of a concrete succession plan casts a shadow over their future, as well as the assets and portfolios at their disposal. Succession planning is not just about people; it’s about what’s happening with the whole portfolio, the whole asset base in the family. It’s about preservation and progress. Key Challenges Succession planning for family offices poses challenges encapsulated in the four Ts: transition, talent, time and technology. Transition : This is the cornerstone of the entire succession process. It isn’t a mere shift in roles; it represents a comprehensive transformation that facilitates the transfer of all assets, from investment portfolios to talent, experiences and even technologies. Talent : The transfer of leadership and skill sets within a family context follows suit, demanding the skill to balance familial dynamics and professional merit. Identifying and nurturing the next generation’s capabilities while maintaining the integrity of family values is a complex task. Not for the faint of heart! Time : This aspect of succession planning marks another obstacle. Dedicating time and energy to plan and nurture the next generation requires prioritization amid the dynamics of these leaders’ busy agendas. It also requires careful, caring planning to synchronize the departure of senior leaders with the readiness of successors – a balance of accommodation and encouragement. Technology : The evolving technological landscape adds another layer of complexity, necessitating the adaptation of legacy systems to contemporary tools. A strategic, proactive approach is needed to ensure a seamless transition that preserves the family office’s legacy and values. Consequences Of Unplanned Exits: It’s All About Risk Management Unexpected departures can range from senior leaders approaching retirement to the sudden resignation of key executives, perhaps because of health issues. What’s needed? Capacity, capability, energy and focus. The repercussions of not having a structured succession plan are profound, leading to chaos and an untold and unpredictable emotional toll on the organization. In these uncertain times, senior leaders can find themselves stuck. I recall the situation of a client, a 92-year-old patriarch with a family office. While not actively involved in office operations, he has realized that his 65-year-old CIO is on the brink of retirement, leaving uncertainty regarding the future leadership of the family enterprise and the very direction of the family. Craft A Dynamic Succession Plan Just as responsible stewardship is crucial in leadership transitions at operating companies, a similar approach must be adopted when orchestrating the exit and entry strategy for a family office team. Succession planning is not just about managing people; it’s about managing risk and embracing forward thinking for the family’s legacy. The process may involve fostering a capable management team, potentially ceding leadership to a key individual or board, and ultimately facilitating a partial or full exit from the family office affairs. Consider the following tips during the planning phase: Build a succession committee : This is a crucial step. Create a specialized team tasked with overseeing the entire succession process. This committee should be able to navigate the dynamic nature of succession planning. Identify and develop talent : Explore strategies for determining and nurturing prospective successors, either within the organization or through external talent acquisition. Seek guidance from external advisors : They can introduce new perspectives that the family office might have overlooked. This can challenge the family’s status quo, presenting innovative ideas and incorporating diverse viewpoints. Review regularly : As with any planning process, you need to regularly review and adjust the succession plan as circumstances evolve. Planning Is Essential Change is bound to happen, and leaders must stay ahead of the curve. This isn’t just a strategic choice; it’s a responsible commitment to the very essence of the legacy these family offices represent. By embracing the inevitability of change and developing a thoughtful succession plan, family office leaders can safeguard not only the financial prosperity of their portfolios but also the enduring strength and resilience of the familial bonds they have cultivated and the communities they support. The significance of early planning lies in the options it affords, mitigating the risks associated with unexpected departures or lack of preparedness. The exit of your family office team is not a matter of 'if' but 'when' and acknowledging this reality is the first step toward ensuring a seamless transition that safeguards the legacy you’ve built. About the Author - Jeff Noble , CMC, FEA, is Director of Private Wealth Family Office at BDO Canada LLP. He is based in Toronto and this article has been published with his permission.

Latest research from STEP highlights the vital need for family business owners to talk and plan to keep their legacy, relationships and family businesses alive. 69% of family business owners do not have a succession plan detailing what will happen to the business and who will run and own the business after their death. And only 32% of family business owners in the UK have an up-to-date will according to independent research by STEP, the membership body for inheritance advisors. With many family businesses, including farming families, facing an inheritance tax charge on death following the recent Budget and the curtailment of the availability of inheritance tax Business Property Relief (BPR) and Agricultural Property Relief (APR), the need for family businesses to succession plan will become even more important. According to the STEP family business survey, the top three reasons for not having a succession plan are: 27% said they know they should do it, but haven’t got around to it; 15% think they don’t need to do this yet as there is plenty of time to plan; and 14% don’t have a clear successor. At the time of the survey, a significant change in health (24%), wanting to step back or retire (23%) or when reaching the age of 60 or more (22%) were the main trigger points given that would motivate those family businesses without a succession plan to put one in place. Matthew Braithwaite TEP, STEP member and Partner at Wedlake Bell, said: "Many family business owners will be increasingly concerned about the curtailment of APR and BPR and the effect this will have on their succession planning. There is a now an even greater need for family business owners to plan ahead and start succession planning to mitigate IHT on the transfer of the business on death." "Without an up-to-date will and succession plan in place, family business owners increase the risk of family and business breakdown, and higher inheritance tax liabilities. This leaves family members and employees to deal with the often very painful fall-out with the business, its values, and wealth not passed on as intended. The fire sale of the family business, family members locked in disputes and being excluded from the business are very real and unintended legacies for too many family businesses." Only 44% of family business owners surveyed have had a conversation with family members about their succession wishes for the family business and assets following their death; and, 27%[5] avoid talking about the business and its finances with family members altogether. According to STEP members, even the simple act of having a conversation about the future means the risk of future conflict is greatly reduced. All too frequently, failure to communicate clearly with family members about plans for succession have caused or contributed to bitter disputes putting family businesses and farm estates at high risk of failure and inheritance not passed on as intended. Prior to the recently announced reforms to APR and BPR, STEP commissioned the independent research surveying 500 family business owners at a time when inheritance disputes, contentious claims, and litigation are on the rise. STEP members, who include lawyers, financial advisors, and estate practitioners, are seeing an increase in demand for inheritance and succession services as a consequence of growing complexity within families. Blended families, divorce and relationship breakdowns, combined with an increase in dementia and incapacity, are affecting generational and multi-jurisdiction family dynamics. In the UK alone, there are 4.8 million family businesses employing 13.9 million people – making up nearly 90% of all private sector businesses and contributing £575 billion to the UK economy. As well as the personally devastating emotional and financial shock to the family, a lack of succession planning risks jobs and businesses falling into the wrong hands. The biggest fears of family business owners themselves, if they were to die tomorrow without a succession plan in place, are: The business may not continue to be run with the same core values, damaging my legacy (32%) Family infighting and disagreements (27%) The business would close and staff would lose their jobs (25%) The risk of family members being pushed out of the business and the business no longer being a family business was another major fear for 23% of family business owners. In contrast, 74% of family businesses with a succession plan agree that having a plan has made their business stronger, and has helped them to grow. Likely to be added to this list is the inheritance tax liability on the business that will arise on their death. Matthew Braithwaite TEP concludes: "It’s crucial that family business owners talk and plan, particularly when inheritance tax is likely to be a greater consideration. Legacy is incredibly important to family businesses and starting the conversation means that the future of the business and your family is much more secure." "Have the conversation now, get advice and put in place an up-to-date will and succession plan. This will save so much in-fighting, conflict, emotional distress and financial cost in the long run, and help preserve the business and its legacy." The majority (60%) of family business owners STEP surveyed would like the business to stay within the family after their death and pass to the next generation. This increases to 70% among those that have taken action and put a succession plan in place. Open communication and early planning are key to this. It also makes great business and tax sense to provide the next generation with a seat at the table and a clearer role to play in the future success and growth of the family business. In a bid to help support family business owners to start the conversation and plan better for succession, STEP has published advice and guidance here As Paul Andrews, Founder & CEO of Family Business United adds, "Families need to have conversations sooner rather than later given the recent announcements of the changes to APR and BPR and the consequences of not having addressed the issues meaning significant IHT liabilities may arise upon the death of a shareholder." "We know that many conversations have not taken place out of respect for the older generation but the changes mean that it is important to have the conversation so as to bequeath wealth to the next generation and not a whole host of problems and a liability that needs to be funded and may result in the need to sell the business."

There have been a lot of inheritance tax (IHT) changes in the recent Budget. High net worth families and businesses have had their succession planning options curtailed. Robert Davies from Foot Anstey takes a look at whether Family Investment Companies (FICs) are a tool to consider post Budget 2024. IHT- What’s Happened? The rates of IHT have not changed from 20% on lifetime chargeable transfers, and 40% on death. The Nil Rate Bands remain frozen at £325,000 per person, transferrable between spouses, plus £175,000 when passing residential property to direct decedents. When put together there are up to £1 million of allowances for a married couple. However, the Budget has brought extra assets within the scope of IHT. Most significantly: Pensions – most pensions are now brought within a person's estate on death from April 2027 Agricultural Relief (APR) and Business Relief (BPR) – farmers and business owners can only claim £1 million relief against agricultural or business property and qualifying shares. Anything over this can only attract 50% IHT relief. The £1million is a total allowance per person, across both reliefs. Any unused relief cannot be transferred to one's spouse. This means that for anyone with pensions, or qualifying assets under either relief, the scope for IHT to apply on their death may broaden, as discussed below. Pension Pot Holders The new IHT treatment of pensions is being widely criticised across the industry. Most unused pension funds are due to fall within a person’s estate from April 2027. The reason stated is to prevent pensions from being used as a vehicle to pass down assets IHT free. Although there is a consultation on how this will work in practice a U- turn on this policy is not expected. A pot of money that previously could be safely ignored for IHT planning purposes should now be reviewed. Farmers & Business Owners Before the Budget business owners and farmers have received up to 100% IHT relief on qualifying assets on death. If you met the criteria, IHT was therefore unlikely to be a problem for the farming or business communities. However, from April 2026 any assets qualifying for business property relief (BPR) or agricultural property relief (APR) will have a combined threshold of £1,000,000 before becoming subject to inheritance tax. Assets over the £1 million can attract 50% relief but the remainder is charged at the usual 40% IHT rate on death. Farmers and business owners have the majority of their liquidity invested in their business and it is not easily realised by the younger generation on death. For many this is potentially a very hefty tax bill to be raised from non-liquid assets and farmers and business owners alike will be looking at their options. Buy-To-Let Property Owners Buy-to-let property has also become a less attractive prospect in recent years as a vehicle for intergenerational wealth. Furnished holiday lets no longer have favourable tax treatment (from April 2025) and the relevant rates of stamp duty land tax have increased in the Budget. Mortgage rates continue to be high in comparison to recent memory. AIM Share Owners Until the Budget, investing in AIM shares was an attractive succession planning option for some people as the shares often attracted Business Property Relief at 100%. From 6 April 2026 this relief drops to 50% (with no £1m allowance). Is Gifting The Answer? For those who can afford to pass wealth down during their lifetime, the rules remain unchanged for gifting. A gift to anyone other than one's spouse (which is ignored for IHT purposes) falls outside of the estate for inheritance tax, provided at least seven years have passed since the gift. However, gifted assets are outside the control of the donor. The recipient may be too young to manage large sums of money or the asset may be at risk in the course of a future divorce or bankruptcy. It is also important to note the gift must be a true one from which the donor no longer benefits. Gifts in which the person making the gift reserves a benefit- for example 'gifting' a house but continuing to live in it will fall foul of the 'gifts with reservation of benefit' rules and has adverse tax consequences. Should A FIC Be Part Of The Wealth Structure? FICs have been growing in popularity for some time as an option for intergenerational wealth transfer. The tax rules applying to FICs are largely unchanged following the recent Budget and indeed with increasing rates of capital gains tax the relative tax advantage may have increased. What Is A FIC And How Does It Work? A FIC is a private company typically used to hold, manage, and pass down family wealth. It can be Limited, or Unlimited (with the latter requiring far less Companies House disclosure, but providing less liability protection). It has articles of association and is controlled by directors. It allows family members to place assets, such as investments or property, within a company structure. The shareholders would normally be different members of the family, with the directors usually being the founders initially with this changing over time. A FIC can accumulate wealth over time, with the directors having full control over when payments are made to shareholders. This can be by way of loan repayments, or income payments in the form of dividend payments, interest payments or a salary to employees and directors. FICs therefore offer flexibility in ownership, voting and dividend rights, allowing families to structure them according to their specific needs and goals. Tax advantages are the other important consideration. Value And Future Growth Given Away - Control Retained When family members gift FIC shares to younger generations, this can qualify as a Potentially Exempt Transfer. Provided the donor survives for seven years after the gift, the shares’ value will pass from their estate for IHT purposes. If the gifted shares increase in value, this growth benefits future generations without being subject to IHT on the donor’s death. FICs allow specific "growth shares" to maximize this advantage, reducing IHT for high-growth investments. Older generations would usually retain some shares in the FIC, often those with voting rights, allowing them to control the FIC and continue to receive income if needed. Tax On Income A FIC is subject to corporation tax on its income. This rate, between 19% and 25%, remains considerably lower than the higher income tax rate (currently 45%). Retained profits within the FIC allow for more efficient reinvestment, amplifying the long-term compounding effect and making FICs suitable for those looking to preserve and grow wealth within the company over time. Tax On Gains The 2024 Budget has increased CGT rates on most assets. Any gains on assets within the FIC will be subject to corporation tax rather than CGT, which can be a more tax-efficient option in the long term, particularly for high-growth investments. However, transferring non-cash assets into a FIC can trigger an initial CGT charge at the point of set up. If the FIC holds shares in a trading business, it may be possible to sell the business without an immediate tax liability for the FIC. This is an added advantage for those looking to sell a family business, though extracting funds from the FIC post-sale should be strategically planned. Reinvestment Potential Dividends paid into the FIC from its investments—such as a share portfolio within the FIC—are mostly exempt from corporation tax. This feature allows income to be reinvested with minimal tax impact. When dividends are distributed from the FIC to family members, they are subject to income tax beyond the £500 tax-free allowance. Are FICs Right For Me? In our experience people tend to see the most benefit from a FIC if they are: Business owners; and/or Hold cash (from either selling their business or an inheritance), to deploy into a wealth structure However, FICs can hold any asset type and so can be considered in a variety of situations. As part of a review of succession plans, careful consideration of a FIC should be undertaken. About the Author - Robert Davies is a Managing Associate at Foot Anstey LLP. If you would like to discuss your own situation or that of a client, and whether a FIC is right for the context, please get in touch with Robert or a member of the Succession and Tax team to discuss further.

Preparing to pass the business to the next generation is often seen as one of the biggest challenges facing the family business, resulting in changes both for the family and the business. In addition, there are issues that need to be faced such as the fact that the current leader is getting older, and getting closer to ‘death’ which is a topic that is not often up for discussion, and there is the matter of the next generation waiting in the wings, some willing and able to take the helm and others quietly hoping that they will never be asked. Sadly, doing nothing does not make the succession challenge disappear as it will inevitably happen one day. So, it is not easy to plan for succession due to the emotional and relationship aspects that need to be addressed, but successful family businesses mitigate the risk to both the family and the business by planning for the future and therefore being in a position to address the topic in a much more rational and business-like manner. As Paul Andrews, Founder & CEO of Family Business United explains, “Succession planning should always be on the agenda for any business and cannot really start early enough. Businesses that plan to succeed reduce the risk of problems further down the line.” “Although it does not eliminate the risks completely, holding a rational, sensible conversation about what the business needs from the leader going forward and evaluating this against the potential in the next generation in a clear and practical manner, undoubtedly provides a greater platform for success going forward.” With that in mind, the succession planning process can be broken down into seven key steps, helping to engage the next generation in the conversation: 1. Preparing Attitudes It is important that the next generation understand the nature of the business, and the values that are important too. Many of these will be derived through contact with the family business as they grow up, summer work experience, listening to conversations, visits to the office etc and these are important so that they gain a feeling for ‘what the family business is all about. 2. Entry Into The Business Clearly, the next generation need to want to work for the business, have the right skills and competencies and entry into a role in the family business will provide them with this opportunity. It is important that they enter a role for which there is a need and are not simply recruited as they are related and there needs to be a clear job description and role for them, just as there would be for any other new inductee. It is also important to ensure that they are given the necessary training, orientation and assistance in developing relationships within the business with other employees, managers and directors too. 3. Developing Their Understanding Once the next generation have gained a footing in the business and are performing a role, the next stage in the succession planning process is to develop and cultivate the skills required to lead the business in the future. Initial understanding can be derived internally but external inputs may assist in the process through mentoring, leadership programmes and university educational programmes too. 4. Leadership Development As the next generation get older, and the existing generation have aged too, there will be a period when the leadership skills of the next generation are developed, preparing them with the skills that may be required to run the business in the future. 5. The Selection Process Selecting the next person to run the business is not an easy decision, and there may well be more than one candidate to consider from within the family as well as outsiders. It is important that the selection process is clearly understood by all concerned and that the process is adhered to in order to reduce the risks going forward. The process may involve selection by the incumbent, the family executive team, the board of directors or general consensus between the family, board and executives. 6. Transition Once the successor has been appointed there will be a period of transition where they become involved in the strategic decision making processes and the development of their own management team too. Over a period of time, key relationships are transferred and naturally the incumbent will do less and the successor will do more. 7. Starting Again Although unlikely to commence straight away, when it comes to leadership of the family business, succession planning should always be on the agenda and consideration should always be made to the next generation and developing the leaders of the future. As Paul explains, “All too often family businesses leave the decisions until it is too late – the incumbent passes away suddenly and the next generation are left to pick up the pieces, at a time when they are emotionally hurt and grieving and planning in advance can help to reduce the burden at that time.” “Furthermore, failure to address the issues on a timely basis may result in the next generation forging a career outside of the family firm and then decide that they don’t want to come back to the family business so communication between the generations is vital to ensure the right outcome overall, for the family and the business.” Succession planning does not happen overnight but clear and open communication over the years can certainly help to provide a framework within which to operate, with everyone knowing where they stand and understanding what the business needs and the skills that the next generation need to lead the business going forward too.

Succession planning is an inevitable consideration for every business owner, no matter the size or industry of the business. Eventually, every leader will face the reality that they won’t stay in their current role forever. Even if the business was founded by the owner, there will come a time when planning for an exit becomes necessary. Recent changes to the inheritance tax treatment of privately owned trading businesses make such planning more important than ever since it may longer be possible to pass the business to the next generation free of inheritance tax. Whether the plan is to retire, transition the business to a new generation, or sell, succession planning is essential to ensure the continuity and future success of the business. This article explores the practical aspects of succession planning and how to approach the process effectively. Why Succession Planning Should Start Early One of the most important pieces of advice for business owners is that succession planning should never be left until the last minute. While the daily operations of running a business often take precedence, putting off succession planning can lead to unforeseen challenges when the time for transition arrives. The key to smooth succession is to start early - preferably years before the intended exit. According to the International Accounting Bulletin (February 2024), while 30% of UK businesses recognise the importance of succession planning, only 10% have integrated it into their overall business strategy. The reluctance to engage in succession planning often stems from both practical and emotional factors, such as fear of relinquishing control or uncertainty about the future. However, a business cannot achieve long-term sustainability unless it plans for leadership transitions. Creating An Options Report: A Roadmap To Succession A critical first step in effective succession planning is the creation of an ‘Options Report’. This report provides a comprehensive analysis of the business and helps owners identify and prepare for potential succession paths. While the process may seem daunting at first, working with experts to develop an in-depth analysis can make the task manageable and more strategic. What does an options report include? The ‘Options Report’ typically includes a deep dive into various aspects of the business to formulate strategic recommendations for succession. Key components include: Leadership assessment : Identifying the strengths, skills, and competencies of the current leadership team while pinpointing any gaps that need to be addressed. Succession risks : Evaluating potential risks associated with leadership transition, such as the age of current leadership and the availability of successors. Talent pool analysis : A thorough review of the internal talent pool to determine if there are candidates ready to step into leadership roles. Leadership development strategies : Creating strategies to nurture and develop future leaders, including mentoring and training programs. Market and industry trends : Understanding market trends and industry shifts that may impact the business and influence succession decisions. Succession roadmap : A clear timeline outlining key milestones and actions to ensure a smooth leadership transition. Comparison of succession options : Evaluating different succession options, such as selling to a third party or family transition, and their potential impact on the business's future and valuation. An ‘Options Report’ not only prepares the business for succession but also provides the clarity needed to determine the business's current value. Understanding the business's worth and whether it aligns with the owner’s personal goals, can inform the decision-making process when the time comes to exit. Additionally, the report may identify areas for potential growth that can increase the business's value before sale or transition. The Impact Of External Factors On Succession Planning External factors can influence the planning process, making it even more essential to have a well-established strategy in place. For example, recent changes in tax laws, such as the increase in capital gains tax rates, adjustments to business asset disposal relief and changes to the inheritance tax treatment of private trading businesses in the 2024 budget, can impact the succession process. A robust succession plan can help the business respond to these changes more effectively, ensuring the business is agile and can adapt to external shifts. Starting Early Succession planning is not an event, but a process that requires time, careful consideration, and proactive steps. By starting early and crafting a comprehensive ‘Options Report’, business owners can ensure they are prepared for a smooth transition, regardless of the path they choose. Whether the plan is to hand over the business to family, sell to a third party, or transition to a new leader, the goal is to preserve the value and continuity of the business for the long term. About the Author - Should you require assistance or support in any aspect of structural, governance or succession planning for your family business, the team at Buckles can offer impartial, experienced guidance on all aspects of ownership transferal. Contact them via their website to discuss the options available.

When business owners decide to step down, one of the most common succession options is to sell the business to a third party. A trade sale, where a business is sold to an external buyer such as a competitor or corporate purchaser, can offer numerous advantages, but it is not something to be entered into blindly without fully understanding the consequences. Here, we take an in-depth look at this exit strategy and explore the key benefits and potential drawbacks of pursuing a third-party sale. What Is A Trade Sale? A trade sale involves selling the business to an external buyer, which could be a competitor or a company in a related industry. The buyer may be an individual, a corporate purchaser, or an investment firm with significant resources. In many cases, the business will be sold for a lump sum, but in some situations, the deal may include performance-based payments that come after the sale. Trade sales are an attractive option for many business owners due to their potential for a quick exit, financial return, and continuity of the business under new ownership. Advantages And Disadvantages Of Trade Sales A trade sale can be a lucrative exit strategy for business owners. However, the process is complex and can come with risks. Careful planning and understanding the full scope of the trade sale process are essential to ensure that the transition is smooth and that the business is positioned for success under new ownership. There are several core pros and cons to consider when deciding upon a trade sale exit, including; Positives: Higher sale price : One of the most significant advantages of a trade sale is the potential for a higher sale price. A competitive bidding process can push the price upward, with multiple buyers offering competitive offers. Additionally, a buyer may be willing to pay more if they believe they can increase the business's profitability after acquisition. Accelerated payment : In many trade sales, particularly those involving private equity-backed buyers, the business owner can receive a large portion of the sale price upfront. This is referred to as 'accelerated consideration.' The buyer often has the capital to pay for the business quickly, making it an attractive option for owners looking for a fast exit. Shorter handover period : Unlike some other exit strategies, trade sales can often be completed with a shorter handover period. This means the business owner can exit more quickly, although they may remain involved for a brief period during the transition. The specifics of the handover, including the owner's role during this period, will be outlined in the sales agreement. Tax : Another advantage of trade sales is the potential tax benefits. Capital gains tax (currently 24%) applies to the sale of assets or shares in the business, which is often lower than income tax or taxes on dividend income. There is also the possibility of claiming Business Asset Disposal relief which means only 10% tax is paid on the first £1million of gain. This tax advantage makes trade sales an appealing option for owners looking to maximise their financial return. Negatives: Due diligence process : One of the most time-consuming aspects of a trade sale is the due diligence process. Third-party buyers will thoroughly review all aspects of the business, including financials, operations, intellectual property, and employee records. This can create a complex and disruptive process that puts the business's confidentiality at risk. While non-disclosure agreements (NDAs) can protect sensitive information, there is always a possibility that some details could leak. Risk of distraction : The due diligence process, as well as the negotiations leading up to the sale, can be highly distracting for the business owner and management team. This can lead to operational disruptions if not properly managed, affecting the business’s day-to-day performance. Deferred consideration : In some cases, part of the sale price may be paid out over time based on the future performance of the business. This is referred to as deferred consideration. While it can be financially advantageous, it introduces the risk that the seller will not have control over the company’s future performance and may not receive the full amount if the business doesn't perform as expected. In conclusion, whilst a third-party sale can be a highly effective exit strategy for business owners, it is crucial that they be fully aware of the complexities and risks involved. To ensure a smooth transition and maximise the benefits of a trade sale, careful planning, clear communication, and expert advice are essential. By weighing the pros and cons and understanding the full scope of the process, business owners can make informed decisions that align with their long-term goals and the future success of their business. About the Author - Should you require assistance or support in any aspect of structural, governance or succession planning for your family business, the team at Buckles can offer impartial, experienced guidance on all aspects of ownership transferal. Contact them  via their website to discuss the options available.

Failure to implement a succession plan is one of the main reasons why so few family businesses survive, future generations. The combination of the evolving volatile economic implications of the Ukraine War, post recent UK and USA elections and post Brexit, alongside recent changes introduced by the UK Budget in October 2024 have added further importance to the need to carry out effective pro-active succession planning for family businesses. The best way to secure a family business’ future, is to look after the business, because if you look after the family business, it will look after the family through the generations, writes Feargal McCormack, Head of AAB Family Business Sector Team. The UK’s recent Budget in October 2024 has sent ripples through many family businesses and the agriculture industry with fundamental changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) which significantly impact how family businesses and farms would be passed down through generations. For decades, these reliefs have enabled business owners and farming families to transfer assets and land upon the owners death, without incurring inheritance tax. Now with these protections stripped back, ensuring the continuity of a family business or farm now requires a proactive approach to succession planning, facilitated by a Succession Facilitator and incorporating strategic leadership, finance, legal and tax expertise to navigate the complexities ahead. The transfer of power from one generation to the next is one of the most emotionally fascinating challenges facing family businesses. The evidence clearly demonstrates that delaying or poorly planning this transition can create havoc for a business in both the short and longer term. A key question for business owners is to reconcile individual and family aspirations with the commercial goals of the business. At a high level, there are four key issues to be addressed by the current owners: whether they think it is better to sell the business, divide it up, transfer it in whole or in part to the next generation, or bring in non-family professional management to run the business, retaining ownership in the family. It also has to be acknowledged that it is not always easy to divide up a business and for the business to remain commercially sustainable. The overriding characteristic that distinguishes most family businesses is a unique atmosphere which creates a sense of belonging and an enhanced common purpose among the whole workforce. Although intangible, this factor manifests itself in a number of very concrete and positive attributes that can serve to give family businesses a significant competitive edge which ultimately supports research, that over time, family owned companies, outperform public companies. There are a number of key challenges for family business succession and continuity. At the outset, it must be acknowledged you want to be able to control events and do not want events to control you. In order to do this, business owners need to plan early for succession. Succession is a process and not an event, and it is important to ensure that management structures, financial discipline and information systems are fit for purpose and the current owners need to ensure there is a sound business to hand over to the next generation. The best way to facilitate strong business continuity and succession, is to make sure that the business is ready for sale, even if you never sell it. On average, it can take up to three years to get a business ready for sale. Thus, in terms of succession planning, it is really important to ensure that the culture of the business is all about encouraging best business practices and an open growth mindset to ensure smart working and commercial sustainability. Working smarter will incorporate creating an adequate high performance culture of competitiveness, utilising innovation, technology, data analytics and flexible work practices and opting for solutions that emphasise health and safety while reducing carbon emissions. Commercial sustainability will mean promoting a culture of resilience, embracing disruption, aggressive growth, lean processes (reduce waste and continuous improvement) and future proofing the business by transforming the organisation to create a ‘better norm’ and satisfying today’s needs without endangering future generations. In terms of succession planning, a key consideration includes independent financial security for current family owner(s). In our experience, many owners in fact neglect their personal finances and wealth management. People who own successful enterprises often tend to believe that the business itself represents their best personal nest egg, and it would guarantee their financial security when the time comes for them to step down. This can be a major mistake due to unforeseen circumstances. There are two schools of thought on the best way for business owners to engineer financial security and these are; ongoing cash withdrawal or building up balance sheet in restructuring. We strongly recommend a combination of both methods with a greater emphasis on regular ongoing cash withdrawals to avoid placing all your eggs in one basket. At times, there is a common misconception that the oldest child should take over as Managing Director and this is not always the case and should never be assumed. Equally, another concept is that all children should have equal shareholdings. Again, this should not be assumed. From a UK tax perspective, there are two taxes which need to be given consideration, namely Capital Gains Tax and Inheritance Tax. The introduction of the tighter inheritance tax rules in the UK October 2024 Budget, means that without proper planning, substantial tax bills could result in forced sales of business assets or land, potentially dismantling multi-generational family businesses. From April 2026, the first £1million of combined businesses and agricultural assets will remain exempt from inheritance tax, but any amount exceeding this threshold will be taxed at 50% of the full rate (equating to an effective rate of 20%). The nil rate band of £325,000 will remain unchanged until at least 2030. This represents a stark contrast to the previous system, and the reality is, that without careful planning, the next generation could face unmanageable tax bills that threaten their ability to continue operating the business into the future. The most important thing is to choose the right people for the right job and also in terms of ownership structures, which is best for the business. Such a consideration must also give due recognition to all the stakeholders in a family business and there are a number of clear distinct stakeholders in a family business including; diverse family members, non-family employees, family investors and sometimes non-family investors. It is very important in terms of creating a succession continuity plan that all these stakeholders are considered as part of the solution. Personally, I have found that combining business and family assets via a Statement of Affairs for the senior generation and a Family Agreement, is the best way to facilitate the transfer of family and business assets to the next generation. The most successful family business succession transitions are those that result from establishing a partnership with the next generation, based on mutual responsibility, respect and commitment.   The main elements in a family transition partnership are summarised below: Start the planning early; Statement of Affairs – both business and non-business assets of the senior generation; Encourage intergenerational teamwork; Consider the various stakeholders involved in the family and the family business; Develop a written succession plan e.g. a Family Agreement, which is not a legal document but is an overall framework document which may facilitate Shareholders Agreements, Partnership Agreements, Directors Service Agreements etc. which are legal documents; Take advantage of outside help (utilise a Succession Facilitator); From a business and family perspective, to treat all children ‘fairly’ and to provide clarity and remove uncertainty to enhance the future viability of the younger generation and indeed, their families; Consider tax implications of proposed solutions; and Embrace the future for key management in the business. In our experience, it is best to address the transfer of family business assets and business assets when the senior generation are in good health and in this context, address issues which will minimise opportunities for a family dispute going forward. Personally, I believe it is very sad when the senior generation do not take responsibility for trying to resolve the succession issue when they are in good health and fudge it, and leave it to the next generation, as in my experience when this happens, it is far more difficult to resolve. AAB Group work with family businesses to help them create the balance between family and business needs, de-risking and maximising family wealth, planning for succession, implementing governance frameworks alongside policies and procedures. The objective is to help family business owners discover the peace of mind, knowing their family’ wealth is protected, and preserved for the benefit of future generations.

Recent news that Prada has agreed to buy Versace in a £1.1billion deal, that brings together two of Italy’s biggest luxury fashion brands, highlights the success delivered by the company’s owners and their determination to keep their business independent and under family control. Duncan Jackson, CEO of Buckles Solicitors LLP, shares his thoughts on succession and the lessons from this recent news for other family firms. Prada was founded by Mario Prada in 1913 and has transformed from a small leather goods shop in Milan into a $19 billion global empire under the stewardship of Miuccia Prada and Patrizio Bertelli. However, as both founders approach their late 70s, the question of succession has moved to the forefront of the company’s future. Miuccia and Patrizio, who have overseen Prada's rise to prominence, are now preparing to hand over the reins to the next generation – Miuccia’s eldest son, Lorenzo Bertelli. This transition is not only vital to the future of Prada but also emblematic of the challenges faced by many family-owned businesses, particularly those in the luxury sector. While the Bertellis are taking proactive steps to ensure Prada’s continued independence amidst growing global consolidation, their approach to succession offers invaluable lessons for other family businesses, including those in the UK. A Plan For Prada’s Future Miuccia and Patrizio’s succession plan is methodical and aims to secure the long-term health and autonomy of the Prada brand. Lorenzo, who has already taken key leadership roles in marketing and sustainability, is being groomed to take over the company. He now holds 50.5% of the family's holding company, Ludo, which controls 80% of Prada. This move ensures that Lorenzo is well-positioned to lead the company while maintaining the Bertelli family’s controlling stake in the business. This decision is not just about ownership but also about leadership. Lorenzo has been deeply involved in the company’s operations, learning the ropes from his parents over time. This succession plan highlights just one way in which family businesses can handle the migration of ownership across generations, but it is not a method that will suit everyone. Here, Miuccia’s transfer of nearly all her shares to Lorenzo demonstrates a rare move towards a controlled transition of power - one that will preserve the family’s influence and control while passing the baton to the family’s chosen heir. Many other businesses will instead opt for a more gradual approach which sees transition occur over many years, and not always just to one sole beneficiary. But of course, the whole process of succession should involve taking a realistic, impartial view of what will work best for the business and the individuals involved in the longer term, and taking the route which will achieve the most desired outcomes in the future. What UK Family Businesses Can Learn From Prada’s Succession Plan Prada’s succession strategy offers several key takeaways for family-owned businesses in the UK, especially those looking to secure their future while maintaining control and independence. Start Planning Early : Like Miuccia and Patrizio, UK family businesses should start planning for succession well in advance. This ensures that the next generation is adequately prepared and that the transition process does not disrupt day-to-day operations. Delaying decisions can lead to confusion and conflict, as seen in the struggles of brands like Ray-Ban’s parent company Essilor Luxottica, where succession challenges persist after the passing of founder Leonardo Del Vecchio. Ownership And Control : Miuccia and Patrizio’s decision to transfer ownership to Lorenzo while retaining certain control mechanisms is a smart move. Family businesses should consider mechanisms that allow for generational transfer of power without completely diluting ownership. This can help ensure that the family’s influence remains intact, even as the business evolves. Diversify Leadership Experience : Lorenzo Bertelli’s current roles in marketing, sustainability, and other key areas of Prada’s operations are crucial in preparing him for the role of CEO. UK family businesses should prioritise leadership development for future generations, ensuring that the next generation gains experience in critical business areas, not just in the family’s legacy. Be Ready For Change : Succession planning should not be static. As the luxury market shows, businesses must be agile to thrive in today’s environment. Prada’s focus on sustainability and adapting to new consumer trends is a testament to the need for family businesses to embrace change. UK family businesses should also be ready to innovate and evolve as market conditions shift, even if it means taking calculated risks. Conflict Resolution And Communication : Effective succession planning also requires clear communication among family members. The Bertellis have managed to divide ownership responsibilities clearly among themselves, with Miuccia stepping back but remaining involved in the voting process. Businesses should establish clear lines of communication during succession to prevent disputes during the transition, and if necessary, put in place external advisors to help navigate family disagreements. Guarding Against External Pressures : Prada’s independence is particularly important in the face of increasing consolidation in the luxury industry. Many family businesses in the UK, especially in manufacturing, agriculture, and retail, face pressure from larger corporations. To maintain independence, they may need to innovate, diversify, and protect their unique family values. Succession planning should factor in how to safeguard the family’s legacy while remaining competitive. Prada’s approach to succession provides a valuable case study for other family businesses looking to secure their future, regardless of the sector they operate in. By planning early, ensuring leadership development, and preparing for market changes, these businesses should be able to better navigate the numerous challenges involved in passing the baton to the next generation. While the future may be uncertain for Prada, the Bertellis’ strategic approach to ownership and control may well provide the foundation for the brand’s continued success, and offer some insight for other family businesses also striving to maintain their independence and legacy in an increasingly corporate world.