Transitioning
Family Businesses
By Matthew Wesley
Imagine this is the owner
of your workplace.
She runs the business and her hope is
to pass it down to the next generation.
She may have taken over the family
business, succeeded in her time
there, and doesn’t want to repeat the
mistakes of the first transition or she
may be a founder who recognizes
that the upcoming transition is likely
to be messy and doesn’t know what
to do about it and her family doesn’t
want to discuss it. When the topic does
come up, the tension is indicative of
different perspectives and some strong
emotions.
She is not alone.
The challenges of business succession
are well known. According to the Small
Business Advancement National Center,
over 70% of businesses fail to survive
the first generational transition, 90%
have disappeared by the second, and
98% are gone by the third. This means
that only 2% of family businesses
survive for 100 years.
The results of this failure are often
m e a s u re d i n m i s s e d e c o n o m i c
opportunities and fractured families.
What could have been a vibrant hub of
economic prosperity for the family and
the community is lost forever.
The Causes of Business
Failure
What causes these failures is fairly
well understood. On the technical
side, there is often a failure to plan.
Business owners need solid estate
plans, governance documents, and
transition plans. However, many family
businesses fail because the family
cannot make these plans work. Besides
technical failures of planning, what
destroy businesses are human failures
of communication, trust, preparation,
and alignment. Families fracture and
their businesses fail.
WINTER 2014
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