17 Aug

Succession Planning


According to various experts, 70% of most family owned businesses do not survive the transition from founder to the 2nd generation.




Uber, the taxi hailing company, recently did a survey on the 2 most popular drop-off destinations in Nairobi – Aga Khan Hospital was one and K1 Klub House was the other.



K1 Klub House is a family owned business founded in 1982. 37 years later, it is the most popular frequented club in Nairobi.




What is it that has made this particular venture a success, while according to various experts, 70% of most family owned businesses do not survive the transition from founder to the 2nd generation?It all boils down to successful planning, to which there are three components:



Management and Ownership

are not necessarily the same; one may decide to give the sibling with better management skills a higher stake in the company and distribute to the others the remainder.

Complications are brought about due to relationship and emotions involved as most people are not comfortable discussing aging, death and financial affairs.




Taxes are another important component. Minimization of taxes upon death of a founder can be done by asset transfer tax strategists

Listed below are some tips for successful succession planning in family owned businesses:


1.  Start your succession planning early. Build an exit strategy right into the business plan. It is very important to start training of the successors early enough to enable smooth transition.

2. Do not make impromptu decisions and force them upon your family. Involve them from the beginning.

3. Be realistic; who is capable of running the business? Take into consideration individual capabilities. Do not let relations and emotions rule.


4. Not everyone can have an equal share in the business. Remember, Management and Ownership are not necessarily the same. All owners may not necessarily want to run the business and it may be fair to let the one managing have a larger share. In transfer of ownership, especially death, several factors need to be taken into consideration, for example, inheritance laws as per religious beliefs.

5. Strong internal controls and policies need to be put in place and regularly monitored.


6. It’s not enough to merely think about who is to take over the business. Business growth and embracing change is also required. This will entail attracting, and retaining good human capital.

7. Get third party assistance in your succession planning – an objective professional who can guide you through.



Our Team of Financial Experts at Innovus Group Use Their Industry-Wide Expertise To Provide Various Financial Advisory Services Such As Audit & Assurance, Risk Advisory, Strategic Financial Management, Business Process Outsourcing and Tax Advisory.