Planning for the Future of Family-Owned Businesses
Counseling the Founder
Business and legal advisers understand the importance of succession planning not only to preserve wealth and family harmony, but also to sustain family-owned businesses. What is not widely discussed is the inescapable fact that a change in business leadership will occur whether the owner is prepared or not.
A Harvard Business Review article, ”Avoid the Traps That Destroy Family Businesses,” reminds us of the familiar aphorism, “Shirtsleeves to shirtsleeves in three generations” that describes the propensity of family-owned enterprises to fail by the time the founder’s grandchildren have taken charge. Authors Stalk and Foley tell us that “The data support the saying. Some 70% of family-owned businesses fail or are sold before the second generation gets a chance to take over. Just 10% remain active, privately held companies for the third generation to lead.”
Succession Planning – Getting Started
Introducing a succession planning discussion is not always easy. The subject is a confusing and emotional one, because it mixes business and family dynamics in a manner that invariably affects the future of both.