Transitioning your family business from one generation to another can be a very complex task that may cause tension and uncertainty in the family dynamic. Some individuals may fear this strain on the family and delay succession planning. However, all businesses will eventually transition to new leaders. Waiting to plan the future could be detrimental to the business’ future growth and financial help. In 2016, according to the Family Business Survey by the National Bureau of Economic Research Family Business Alliance, it was discovered that 43% of family-owned businesses don’t have a succession plan, yet 75% plan to pass the ownership to the next generations. Without proper succession planning, the business and family can have disagreements and legal battles. Long- term succession planning can give the next generation time to learn the ins and outs of the family enterprise and for you to see how well they are executing the position.
Inevitably, the transition will take place, whether planned or unplanned. Unplanned transitions generally come with issues that become devastating to the business, family relationships and the family equity. A well-thought out succession plan is an essential advantage to families that are greatly concerned about continuing family ownership and success. Assuming one or more individual is interested in owning and running the family business, a family business advisor is recommended to make the succession run smoothly. An advisor can objectively discuss the pros and cons of transitioning from one generation to the next.