How to ensure that your small business will survive the transition into the next generation?
Less than one third of family businesses survive the transition from first to second generation ownership. Of those that do, about half do not survive the transition from second to third generation ownership. At any given time, 40 percent of U.S. businesses are facing the transfer of ownership issue. Founders are trying to decide what to do with their businesses; however, the options are few.
The following is a list of options to consider:
- Close the doors.
- Sell to an outsider or employee.
- Retain ownership but hire outside management.
- Retain family ownership and management control.
There are four basic reasons why family firms fail to transfer the business successfully:
- Lack of viability of the business.
- Lack of planning.
- Little desire on the owner’s part to transfer the firm.
- Reluctance of offspring to join the firm.
The primary cause for failure is the lack of planning. With the right succession plans in place, the business, in most cases, will remain healthy.