Creating a legacy: Taking over the family business

New Zealand family businesses are in the midst of a wave of leadership transition to the next generation. This shift represents a large portion of the population involved in wealth transfers. Understanding what’s needed for successful succession is crucial, especially given the challenges that often accompany these transfers.

For the younger generation, navigating leadership succession involves early engagement with the business. Experts suggest that heirs should actively step forward and be ready to learn.

“Succession planning is a delicate balance,” notes Daniel Ryan, ANZ Private’s regional manager for Auckland and Northland. “It's not just about early involvement but creating an environment where every voice is heard. Open communication and mutual respect are essential.”

Ryan emphasises the need for flexibility and adaptability. “Both current owners and successors must learn from each other. It's about preserving the legacy while embracing new ideas that can drive the business forward. This ensures the legacy is honoured while fostering future growth.”

US research has revealed that 70% of wealth transfers fail, and 60% of those failures happen because of a breakdown in trust and communication between family members¹. 

These findings mirror our experience at ANZ Private. The biggest risk to family businesses isn’t complex legal processes or faulty structuring, but family disunity.

However, frank, open, and early dialogue between generations can maintain family unity. The first step in successful succession is ensuring everyone agrees on the core values of the business and family. These values act as a guiding star during change.

“While business conditions and directions may evolve over time, core values remain consistent. This underscores the importance of establishing and understanding those values clearly.”

Next, establish a timeline that includes heirs gradually taking on more responsibility and current owners stepping back.

Ensuring your family’s business lasts across generations requires more than good succession planning – it also needs a willingness to adapt to changing consumer expectations.

Research shows Millennials are more likely to make sustainable lifestyle choices than Boomers². With Millennials currently making up a significant portion of New Zealand’s population³, they will be a major spending force in coming years.

Family businesses can leverage the generation gap to their advantage rather than viewing it as a friction point. Getting input from a family’s younger generation on how to position a business for Millennial and Gen Z consumers could be a competitive advantage.

Before making changes, it's crucial for the younger generation to first understand the business' foundation and leverage expertise within the business to learn current practices.

Mentorship is a key tool in this process, as heirs find it invaluable for becoming future leaders and decision-makers. 

“Success is typically achieved through small, incremental improvements over long periods,” says Ryan. “This is why understanding the business’s history and reasons for its success is important.”

It might seem like the successor has to be the student, but succession is a journey, not a single event, and it's not only for the heir.

While successors need to learn about the business, current owners should also learn about their heirs. Regular conversations between heirs and the older generation, plus one-on-one meetings with a family business adviser is beneficial. In these meetings, successors can share their personal values and vision for the business. Implementing some of these ideas now can be beneficial.

The benefits are two-fold:

• Younger generation feels included and impactful on the future direction of the business
• Older owners gain insight into their successors’ goals, which can influence the future direction of the business.

How does a future successor begin to implement a legacy in ESG (environmental, social, and governance) practices while preserving a business’ original purpose and continuing growth? The answer is to start with an ESG strategy.

ESG is becoming pivotal to business growth, and yet only a portion of family businesses are putting it at the heart of what they do⁴. Learn what developing a net-zero strategy entails. Take the lead in learning how to decarbonise your business footprint, what impact your business has on others, and how any negative effects can be addressed.

If you’re not totally sure you have the confidence and trust of the current generation, ask what you need to do to get it, then act accordingly.