Many of the companies we know today are several decades or even centuries old. Their founders are no longer alive, yet their culture, systems and philosophies continue to thrive. When we look at the ownership pattern of small and medium enterprises in Kerala, we realise that most of them are family-run businesses.
Alongside these are enterprises managed jointly by friends or colleagues. In both models, one common issue stands out: the lack of proper planning or implementation of succession.
A frequent challenge is that the new generation often shows little interest in joining or leading businesses that have been functioning for decades. There are several reasons behind this hesitation. Many of these enterprises do not have well-defined systems or processes. The younger generation also tends to have distinct tastes, aspirations and perspectives that may not align with the nature of the existing business.
In many cases, there is no formal structure or clear reporting hierarchy. Senior managers who have long worked with the previous generation may still dominate the organisation, making it difficult for successors to introduce change, improve efficiency or pursue growth. Legal formalities may also have been neglected over the years, leaving the organisation with unknown liabilities—risks the next generation is unwilling to assume.
Another concern is whether the business itself belongs to a sector that remains relevant, attractive or scalable in the new era. Before any decisions on succession are made, it is essential to understand the interests, skills, dislikes and limitations of those eligible to take over. Only after this assessment can one decide which sector or segment of the business is the right fit for them.
Many of the issues causing reluctance among the new generation can, in fact, be addressed through the SME IPO process. This journey requires organisations to implement structured processes, appoint professional managers, disclose legal obligations and reassess the relevance of their business segments. Through an SME IPO, clarity emerges regarding the organisation’s succession structure and the exact stakes and rights of each individual. This transparency also reassures employees, partners and collaborators and prepares the organisation for its next phase of growth.
It is crucial to recognise that business succession and promoter succession are not always the same. These two transitions should often be evaluated separately, especially when the new generation does not have the interest, conviction or circumstances to take over the business in the required manner. Only in rare cases do the succession of the business and the succession of the promoters align smoothly.
