To make it past the first generation, family owned businesses need a lot of communication and planning for succession.
The challenge is clear: less than a third of all family owned businesses will survive to the second generation. By the third generation, prospects for survival are even worse—only one in 10 will make it. With approximately 80-90% of American businesses being owned by families, the potential for business longevity is not great. However, it can be addressed.
KRCU’s recent article, “Business Succession Planning is Very Important,” reminds us that business succession planning is a process in which business owners research and consider a strategy to move forward in the event of death, illness, or simply transition.
Business succession planning implements several estate planning strategies. There is no “one size fits all” plan. A business owner should carefully consider his or her options. Without a plan in place, there’s a good chance for failure.
There are several factors to be examined. There are questions like estate taxes, liquidity, ownership percentages, family disagreements and the management capabilities of those relevant individuals.
The uncertainty of a transition can impact the business internally among staff and externally with customers. As a result, it’s vitally important to create a business succession plan and communicate that plan to your team and family.
There are many succession planning vehicles and succession planning concerns. Seek the advice of an expert on these matters and do it sooner rather than later. Work with an experienced estate planning attorney, who can walk you through the issues that must be addressed.
Many experts think that business succession planning is at least as important (and maybe more important) than individual estate planning.
Improving the chances that a family owned business will continue past the first generation, takes as much work as building it did in the first place. A seamless transition to the next generation is a worthwhile task, benefiting customers, employees and the community, as well as family members.
Reference: KRCU (June 17, 2018) “Business Succession Planning is Very Important”