For family businesses, planning for succession is one of the biggest challenges they will face and an effective succession solution is critical to their long-term success. While research indicates that approximately 73% of family businesses want to keep the business in the family, this isn’t always possible. Only 12% of family-owned businesses in Scotland are passed down to the second generation and just 7% remain in the family for three generations or more. Despite these figures, less than half of Scotland’s family-owned businesses have a succession plan in place.

Glen Dott, an employee ownership adviser at Co-operative Development Scotland, 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 solution.

Glen Dott

“Sometimes family business owners can bury their heads when it comes to the daunting task of planning for their exit. Yet, it is a vital decision which ultimately determines the company’s future. Rather than viewing it as a necessary evil, business owners should start to recognise succession planning as a potential opportunity for their company to evolve and grow.

“Employee ownership is one solution which offers these opportunities and can be an excellent fit for family businesses for a number of reasons. First of all, it enables the vendor to exit on their terms, giving them a fair price and allowing them substantial control over the process.

“Secondly, it roots the business in its community, keeping skills in the area and retaining jobs locally for workforces that are often long-serving and loyal. Thirdly, by handing control over to those who know it best, the values and ethos on which the company was founded, frequently at the heart of family-run businesses, can be preserved for generations to come.

“Finally, evidence demonstrates that employee-owned companies benefit from a more engaged workforce, which can boost productivity, encourage innovation, and ultimately drive growth and profitability. It can be encouraging and comforting for founders to feel that the businesses they have spent years of their lives building with their families will continue to go from strength-to-strength into the future, and that the employees will reap the rewards of this. 

The past couple of years have seen family-owned businesses including Auchrannie leisure resort in Arran, Harvey Maps in Doune, North Berwick-based Jerba Campervans and Beauly institution The Priory Hotel all move to employee ownership after recognising the suitability of the model as a succession solution and its potential for driving future business success. We expect take-up of the model will continue to accelerate in future years, as more and more businesses throughout Scotland’s business community become aware of the benefits.

The Priory Hotel staff

The Priory Hotel team

Succession planning should not be overlooked and family business owners looking for a smooth exit which secures the best possible future for their business should seek professional advice on their options at an early stage.”

To learn more about EO and whether it could be right for your business, check out our resources page, listen to our podcast or get in touch with us here using the ‘expert support’ option.