For family businesses, planning for succession is one of the biggest and most critical challenges they will face. However, it can also be a great opportunity to maximise opportunities and implement a structure that will allow the business to continue trading whilst staying true to its original values and ethos for generations to come.

Co-operative Development Scotland director Sarah Deas discusses some of the issues family businesses need to consider when looking at their succession options, and why employee ownership can sometimes be the most effective exit strategy for family businesses that want to remain rooted in their local community.

11/12/15 - 15112301 - SCOTTISH ENTERPRISEGLASGOWSarah Deas

“In a family firm, the first choice is almost always to sell to family. However, that’s not always an option if the next generation has chosen a different career. Indeed, the Scottish Family Business Association found that only 33% of family firms reach second generation and only 9% make it to the third; despite this, more than half of family businesses have no succession plan in place.  According to our research, 16,000 employers in Scotland will be looking to transfer ownership in the next five years – and employee ownership can be a very successful exit strategy.  Selling a company to its employees, or implementing an employee share plan, can boost productivity, increase employee engagement, and keep the company in the community.” 

“Employee ownership can be a very successful exit strategy for family businesses.  It allows the vendor to exit on their terms, whilst retaining jobs and rooting the business in its community. It is also an effective way to drive business performance; selling a company to its employees, or implementing an employee share plan, can increase employee engagement, boost productivity and drive growth.

“Some good examples of family businesses which have successfully transitioned to EO include agricultural supplier Galloway & MacLeod and technical textiles manufacturer Scott & Fyfe.

“We are seeing a growth of interest in employee ownership year-on-year, keeping us on track for achieving our aspiration of a tenfold increase in employee in Scotland over a ten year period.  Since 2009, the number of employee-owned businesses headquartered in Scotland has more than doubled tripled. 

“Seeking early advice increases the range of options open to a business owner. Scottish Enterprise offers a free Succession Expert Support service, available to all Scottish businesses.” 

For more information on employee ownership and how it could benefit your business, get in touch for a chat with one of our expert advisers.