SMEpost

Succession @ SMEs: Family business may not always be preferred

Big industrial magnates have the luxury to expect that their sons and daughters will join their companies at some point of time. But not so generally in case of SMEs owners.

Offspring of small and medium scale industrial units seldom go to big colleges to earn their degrees, but rarely back to their father’s business. They prefer a plum cushy corporate job to the grind of running an age old family business.

Old and seasoned SMEs entrepreneurs in Peenya Industrial area and in other parts of Bangalore sigh that in 90 per cent of their cases, they face succession crisis.

There are about 8000 industrial units in Peenya. Most of the industrial units in Peenya are either into mechanical components manufacturing or ancillary auto components manufacturing. There are also many garment factories.

In past few years many small and medium scale units were sold to outsiders because the first generation owners could not pass the baton to their children.

Speaking to SMEPost.com, A. S. Joshi, MD, Qualimech Engineers Pvt Ltd, said that the reason the children are not interested to join their fathers’ businesses is because of the kind and nature of the business. Carrying on the business is riddled with hassles, stress and bureaucratic procedures. Joshi says, “As part of a group of entrepreneurs who struggled for 20-30 years to establish their business, we feel sad to see our business dying”.

Ramakrishna Mudugal, Mudugal, proprietor of Satish Industries and Ganesh Engineering, also council member of Karnataka Small Scale Industries Association (KASSIA), admitted that he is lucky enough to have his son in his company. But he was quick to add that his son is now trying to diversify their business into software industry.

Jayaramu, president of the Peenya Industries Association, said “with new kinds of digital and online based start-ups sprouting each day, the charm to work in a factory producing mechanical components have died”.

Jayaramu added, uncertainties and variables are more in this type of work. Peer pressure and lack of glamour also act a deterrent for youngsters to step into their fathers’ shoes.

Srikanth Datta, a footwear contract manufacturer said, “We are generally components manufacturers or job contractors for bigger industries. So we lack the brand factor”.

Many children of first generation entrepreneurs have either gone into the IT industry, abroad or to other high paying jobs.

Unable to continue without a heir, the owners usually sell their businesses to friends and relatives or diploma holders who have been working in the industry for as long as 10 to 15 years. “Workers also have the added advantage of their experience, which normally the son or daughter of a first generation entrepreneur lack,” said Mudugal