The children of business owners might be stuck wondering, like Succession character Kendall Roy, if their name has been crossed out or underlined. Whether it’s playing out on HBO or in court for the Murdoch family, succession remains a tricky beast for entrepreneurs. Many of them are not willing or able to let go of the reins, avoiding the prospect of passing on their empires ahead of the $84 trillion Great Wealth Transfer.
Entrepreneurs are finding themselves waging an internal ego battle of sorts, financial services company HSBC writes in a recent report. Many desire to keep working while also wanting to pass a legacy on to their children. Still, these leaders understand that it’s a weighty gift and that running a company comes with some unwanted stress. It’s a double-edged sword, HSBC analysts write. And it seems like these entrepreneurs might be set to fall on said sword, if they keep delaying plans.
Just over half of respondents (52%) have no succession plan, according to HSBC’s survey of more than 1,800 business owners in 10 markets. Only 26% have broached discussions about their wealth transfer.
Entrepreneurs just can’t quit
Many business owners, having made their way to the top, are far from ready to get off their pedestal. It’s in line with the trend of baby boomer CEOs abstaining from quitting, holding on to money and power at the risk of spoiling their legacy, writes the New York Times’ Emma Goldberg.
A resistance to letting go is in line with the traits that led many entrepreneurs to their ascent. “The most successful business owners have intense focus and commitment to their business,” Carly Doshi, head of wealth planning at HSBC, tells Fortune. “It is this intensity that contributes to the business’s success. Letting go of that, shifting focus, and finding ‘something else’ to occupy one’s attention are not easy.”
Owning a business is so entrenched in an entrepreneur’s sense of self that many fear what will happen when they leave. More than half of respondents (56%) reportedly worry that leaving their company will be like losing a part of their identity. A striking 64% of entrepreneurs strongly or tend to agree that their professional and personal lives are “completely intertwined.”
“What I am is what I do here [at my company]. I will never exit. I love what I do,” said an entrepreneur from India. As such, only 12% of respondents have a full exit plan in place.
“I don’t plan to retire at all,” a first-generation entrepreneur from Hong Kong told HSBC. “I guess I can continue to work until 80 if I keep myself healthy. Entrepreneurship doesn’t have a break—you have to keep going on and on.”
That being said, most (78%) report that keeping the business in the family is important, something that is at risk without a plan in place. While many haven’t made a plan, 23% of entrepreneurs are looking to leave their business within the next five years.
Fears for (and of) the next generation
Even so, almost a third (30%) of entrepreneurs have a plan in place to pass on the torch to a family member. They recognize, however, that not everyone will want to follow in their footsteps.
“It’s often a double-edged sword when it comes to passing on the business to the next generation,” notes Christo Scott, managing director, HSBC Global Private Banking, in the report. “Entrepreneurs want their children to enjoy the journey and successes that they have had, but are acutely aware of the challenges that come with it and the personal sacrifices they will need to make.”
Many entrepreneurs (43%) want their successors to have the chance to “do their own thing” and avoid the stress (44%) of helming a company. Some report concerns that heirs are not willing to put in the work that they did.
“I don’t care if he joins the family business or not,” an Indian entrepreneur says of his son. “A lot of companies get destroyed because the next generation does not have a genuine interest in the business, or they do not have the necessary skills to run it.”
And of those who took over the family business, many expressed that they were completely trusted to take control (81%), and felt supported (79%) and proud (80%) to do as much.
But some point out that there’s a darker side to succession. Some say (61%) that taking on the business was “the only way to balance family dynamics.” Just over half of respondents report it was stressful—without the option to do otherwise—and held them back from their other career goals. It appears as if entrepreneurs today are looking to break the cycle and keep heirs from taking on the business if that is not their ambition.
In the eyes of Warren Buffett, CEO of Berkshire Hathaway, all this strife calls for a plan. He noted in a company letter the importance of communicating one’s estate plan with heirs so that benefactors can adjust it accordingly and answer succession questions.
All in all, confidence in the next generation is quite high, as 77% of respondents say they have complete trust in them running the business. Wrinkles can form, though, when actually choosing the right person: 40% of entrepreneurs are concerned about finding a successor.
Entrepreneurs’ concerns keep them from leaving
Part of what’s happening is likely a simple conflict of interest. The purpose of wealth in these rich individuals’ eyes is the enjoyment of a certain lifestyle (84%) and their family legacy (83%).
Top motivators for entrepreneurs include building personal wealth (44%) and securing financial freedom for themselves and their family (39%). Walking away from their business likely means an increase in said wealth and agency for a entrepreneur’s child, perhaps at the expense of the entrepreneur themselves.
With wealth and power changing hands, many entrepreneurs aren’t looking to leave unless they think their child can take control and still maintain said wealth and power. A striking 72% of respondents say that having trust in their successors to run the business is a key factor in their exit.
All these fears and mixed feelings keep entrepreneurs in place. Concerns about the true value of the company and actually making the transition also abound. While 43% of current entrepreneurs say they are concerned their business won’t survive with them gone, only 24% of respondents say that their company performed worse after their exit.
Perhaps all these fears of waning power and legacy would be assuaged once a leader leaves, but many are simply not looking at the clock. “I don’t think I’m a very good succession planner,” an entrepreneur said in the report. “If you’re really running a business, you really aren’t thinking about the end game.”
