Can Malaysian SMEs really pass their business beyond 3 generations?

Many Malaysian small and medium enterprises are built through decades of sacrifice.

Founders work long hours, take personal risks, and reinvest relentlessly so their families can enjoy stability and opportunity. Some start with very little — a single shop, a small contract, a borrowed sum — and slowly build something meaningful.

Over time, businesses grow, assets accumulate, and a sense of achievement settles in. What began as survival gradually becomes success.

With success comes pride. And with pride comes hope. Hope that children will be looked after. Hope that the business will continue. Hope that the family will remain united.

Yet there is one uncomfortable question many families quietly avoid.

Can the business — and the accumulated family wealth behind it — truly survive beyond three generations in Malaysia?

This is not a question of intelligence or effort. Many founders are disciplined, capable, and deeply committed to their families. They did not build their businesses by chance. They made difficult decisions, endured setbacks, and carried responsibilities others never saw.

The challenge lies elsewhere. Across Malaysia, it is common to see businesses that thrive under the founder’s leadership but struggle once the next generation steps in.

This is often explained away with familiar reasons — that children are different, times have changed, or the younger generation does not have the same hunger.

While these factors play a role, they are rarely the real cause. In reality, many breakdowns occur because business and family wealth succession planning was never properly addressed while the founder was still fully in control. Growth was planned. Operations were planned. Expansion was planned. Succession, however, was often assumed.

Seasoned patriarchs understand something younger leaders sometimes overlook: what is not decided early will eventually be decided by circumstances. Silence, even when well-intentioned, has consequences.

The idea that wealth rarely survives beyond three generations is frequently repeated, but seldom examined closely. In the Malaysian SME context, the issue is not that families lack values or commitment. More often, it is because roles, expectations and decision-making authority were left undefined.

Founders typically hold everything together. They make the final decisions, manage key relationships, resolve disputes, and carry the institutional memory of the business. As long as the founder is present, the system works — not because it is written down, but because everyone knows who to turn to. This personal authority is powerful. It keeps the business moving and the family aligned.

But it is also fragile. Difficulties begin when energy wanes, health declines, or leadership changes unexpectedly. At that point, families often discover that very little has been formally settled. What once worked through habit, respect and personal authority suddenly requires clarity — and clarity is hardest to establish under pressure.

Most Malaysian SMEs are family businesses in practice, even if not in name. Family members work in the business. Family assets support the business. Business income supports the family. This closeness creates strength, loyalty and resilience.

But it also creates risk. When boundaries are unclear, questions inevitably surface. Who decides when opinions differ? Who takes over leadership, and when? How are children who are not involved treated? What happens if siblings disagree? How is the surviving spouse protected?

Without clear answers, emotional decisions often replace structured ones, particularly during stressful periods. Wise patriarchs know that†family disputes are rarely about money alone; they are about uncertainty, unmet expectations and perceived unfairness.

Many families take comfort in having a Will, believing this settles succession matters. A Will is important, but it addresses only one part of the picture — distribution after death. It does not ensure business continuity, resolve leadership issues, or guide decision-making during periods of uncertainty.

As a result, families are often surprised to find that despite having a Will, they still face delays, confusion and disagreements.

In many households, wives and mothers sense these risks earlier than others. They notice differences in their children’s abilities and interests. They sense unspoken tensions. They worry quietly about what they do not fully understand. Their concerns are rarely expressed forcefully. Instead, they surface gently, often as simple questions: What happens if something goes wrong? Will everything be clear?

These questions are not signs of pessimism. They are signs of care. Family wealth & business succession planning is as much about reassurance as it is about structure. It protects not only businesses, but also the people who will be left to manage the consequences.

One reason founders delay succession planning is the fear of losing control. Experienced leaders know this fear is misplaced. Planning early does not weaken authority; it preserves it. It allows founders to decide while they are still strong and clear-minded, to set conditions rather than leave assumptions, and to protect both the business and family harmony.

Those who delay often find that decisions are eventually made by circumstances instead — by illness, by conflict, or by events beyond anyone’s control.

Passing family wealth and business to the next generation is challenging enough. Passing it beyond the third requires even greater foresight. It requires families to look beyond informal arrangements and verbal understandings, and to think carefully about continuity, capability, fairness and structures that do not rely on one individual.

This does not require complexity. It requires clarity.

Every founder who has built something meaningful should pause and reflect honestly. If leadership cannot be exercised tomorrow, will the business continue smoothly — and will the family remain united?

If the answer is uncertain, it may be time for a quiet review. Not urgently. Not emotionally. But thoughtfully — while choices still exist. A seasoned patriarch understands that leadership does not end with success. It endures through preparation.

About the author

Lee Khee Chuan ChFC,CLU,CFP,FLMI,B.A.(NUS) is a chartered financial consultant and a family wealth specialist, specialising in business and family wealth succession planning for SME and family business owners. With extensive experiences in integrated estate planning, private trust and family wealth succession, he focuses on helping families preserve businesses, family wealth and family harmony across generations. This column is intended to encourage reflection. Every familyís situation is different, and professional advice should be sought where appropriate.