Video: Professional management must in family businesses for successful ownership transition, says expert

Ease of Doing Business for MSMEs: “Mostly, family-run businesses have a lot of people in their family to fill all the seats in the organization. We get our children educated very well, and suddenly, after coming out of good institutions, we directly put them into business. That’s the major problem in MSMEs,” said Surinder Singh Bhogal.

FEASPIRE: Challenges family businesses can't ignore for successful transition of ownership

By Parvathy Pillai

Ease of Doing Business for MSMEs: The need for a proper professional management system is essential to ensure organisational success and entrepreneurial growth especially when it comes to family businesses as the latter prioritises getting members of the family into the organisation rather than hiring skilful personnel, said Surinder Singh Bhogal, Managing Partner at Bhogal Sales Corporation. Ludhiana-based Bhogal Sales Corporation is around the 80-year-old family business in bicycle and its spares manufacturing headed by Bhogal who has has been in the cycle industry for over 40 years.

The company own the brand DNS Bikes and also supplies spares to several international bicycle brands in countries including Mexico, Holland, Germany, Spain, the US, etc.

“Mostly, family-run businesses have a lot of people in their family to fill all the seats in the organization. We get our children educated very well, and suddenly, after coming out of good institutions, we directly put them into business. That’s the major problem in MSMEs,” said Bhogal. 

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According to the PwC’s 10th Global Family Business Survey 2021 – India report, while globally the number of respondents who have formalised succession planning doubled to 30 per cent, in India, the number remained at a similar level as that in our previous survey (20–21 per cent), indicating that this may well be a future area of focus for Indian family businesses.

Moreover, even as family businesses with values in a written form are better prepared for succession and are more communicative and transparent, only 40 per cent have written them down. Family businesses that have not yet started planning for succession may be susceptible to numerous risks. In most cases, neither the responsibilities nor the compensation is defined for the successors entering the industry.

“In a family-run organization, the elder son gets the bigger chunk, and the younger children don’t get that kind of privilege. This disparity creates a problem,” added Bhogal. Hence, building a family constitution is necessary for giving equal priority to every individual and defining responsibilities, which ultimately helps in the successful transition of ownership, he said.

Also read: Delayed payments for MSMEs: Amount involved in pending applications nearly doubled in FY22

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