AltoPartners members in India Sonal Agrawal and Toral Patel have personal experience of family-owned businesses: they are the second-generation leadership of Accord India. Added to that, 70% of their business comes from family-owned businesses of one sort or another.

Family-owned businesses are key to the Indian economy, they say. They’re also well-established - there are companies that are 100 or 150 years old, and still run by the same family. These businesses control a significant proportion of the non-government economy, they say.

There’s a wide range of business models in Indian family-owned businesses, which can range from really large companies to mom-and-pop operations. There is also a host of first-generation entrepreneurs. “And there are people who are second generation. The companies started around the time the economy was being liberalised, in the early 90s,” Agrawal says.

These businesses can be listed companies with a family ownership of 26% and above, or there might be subsidiaries and trusts. Or companies might be family-owned but professionally run. “The market in India is really mature, there’s lots of nuance,” says Patel.

She also notes the critical importance of family in Indian society. “Everything you do in India has a tinge of family,” she says - and those values are intrinsic to these companies. In addition to the strength of those values, family-owned businesses are successful because of the simplicity of their decision-making processes.

They say that succession planning can be challenging in the transition from first to second generation. Agrawal says it is important for owners (also known as promoters in India) to make a mental adjustment.

“They need to decide whether they are acting as custodians or as operators in the process. What do they see their own roles as being? In the first generation, their role is entrepreneurial. They run the business. From the second generation onwards, people start saying, ‘well, maybe I don’t have the competency to take this to the next level, or to run this new part of the business. And we should be getting other people in to do that’. Or perhaps the son or the daughter, the niece of the nephew is just not competent enough. And the owner or the patriarch (occasionally the matriarch), decides that we should be looking outside. This is often a function of the scale that the business has grown to, and the number of divisions or sub companies that have come up which make it physically impossible for the family to manage everything.”

Critically, the roadmap for succession planning needs to answer this question: What does success look like? Even if it means the company continues in another format, or with new ownership, a clear-eyed view of the roadmap for handing over is crucial.

Sonal Agrawal, Managing Partner Accord Group India / AltoPartners India and AltoPartners Global Chair and AESC Global Board Member and with Toral Patel, Managing Partner Accord Group India / AltoPartners India

READ AltoPartners White Paper on succession planning in family-owned businesses