When considering the transition of a family business from one generation to the next, clear communication and careful planning are integral to the ‘success of the succession’. Family business owners are well served to begin planning for the succession long before the event is necessary (experts suggest as long as 15 years prior to retirement). Unfortunately, most business owners fail to plan seriously for their own succession.
This ‘lack of planning’ may have a great deal to do with the fact that while 90% of US Small businesses are family owned, only 30% stay in the family from the first generation to the second and only 15% make it on to a third generation according the U.S. SBA.
Planning for the succession of a family owned business is sometimes a difficult topic to broach – the successor may find it uncomfortable to ask questions regarding the timing and finances surrounding the transition while parents may be hesitant to fully address the eventuality of such a significant life changing event.
Regardless -- Family business owners need to address the issue sooner rather than later. Call upon the expertise of your Trusted Advisors to assist and guide you. Your Attorney, CPA, Financial Advisors and Bankers are all great places to start. Talk it through then get it on paper. You can always make changes over time. Lastly – in order to protect the legacy that you have created, it is important that the next generation have the passion, the desire and the ability to carry on the family business.