A shifting mindset among first-generation business owners could mean fewer family-owned businesses in future.
Family businesses play a key role in Asia's economies, comprising over 60 percent of all firms in Singapore and over 70 percent of listed firms in Hong Kong. However, the younger generation of business owners are thinking differently about the future of their businesses, Sun Life said in its report «The Future of Family Businesses in Asia»
Over 70 percent of younger business owners think there will be fewer family-owned businesses in the future as professional managers from outside the family are placed in charge, according to a survey by the Hong Kong-based insurer.
Additionally, almost 60 percent 0f startup and growth businesses said that more founders will prefer to sell the business rather than pass it on to the next generation, with startup owners expecting to retire 10 years earlier than mature business owners.
Changing Attitudes
«The younger generation of business owners are thinking differently about the future of their business. They prefer to build fast, sell and retire early, rather than pass it on to family as has been favored in the past,» Léo Grépin, Sun Life Asia president, said.
Published this week, the report looks at the perceptions and attitudes to risk, retirement and succession planning and the future outlook for the family business model.
The report was based on a survey conducted in December 2019 among more than 1,300 family business owners in Indonesia, Hong Kong, Malaysia, the Philippines, Singapore and Vietnam, comprising startups (0–5 years), growth companies (6–10 years) and mature companies (over 10 years).
Diverging Views
It revealed differing perspectives between younger and mature business owners on the future of the family business model itself – only 10 percent of mature business owners see the number of family businesses declining in the years ahead.
Additionally, only 10 percent of mature business owners agreed more founders will prefer to sell businesses before they retire instead of passing it to children.
Covid-19 Impact
The study also revealed that younger businesses are less prepared for unexpected business challenges and disruption caused by the Covid-19 pandemic – 49 percent of startup and 55 percent of growth business owners had personal health insurance protection and 28 percent of startup and 36 percent of growth business owners had key man protection.
Mature businesses were comparatively better prepared, with 76 percent of mature business owners having personal health insurance in place and 78 percent with key man insurance protection.
Sun Life recommended that business owners close the protection gap to provide better security for employees, ensure business continuity and attract talent. It also advised them to seek customized financial solutions at different stages of development, and to get external expert advice in succession planning.
