FAMILY BUSINESS MATTERS

Linking One Generation To The Next

       Did you know….90% of business in North America are family owned?   Yet, it is estimated that only 40% survive to the second generation, 12% to the third and only 3% make it to the fourth.    And you ask why?
Having founded and run a not for profit member organization for family owned businesses in New York City, we have lots of experience and understanding of the inner workings of a family business.  Family businesses start with a great vision with hopes of continuing from generation to generation.  Intellectually the founder knows he/she must transition the business to the next generation, but the dynamics and emotions of a family owned business won’t allow it.  Give this some thought:  Initially the founder has complete control, but when children, spouses, siblings, extended family,  divorce come into the business the playing field changes dramatically making transition much more complex.
Good business skills are not determined by blood.  Knowing the family and knowing how to run a business are completely different.  Regardless if it’s a family member or key non family employee, the person with the expertise for specific jobs is the one to be chosen to do the job regardless of genetics.
Knowledge of the family and the business is key when making decisions about succession.  Founders should rely on their knowledge and be willing to relinquish control knowing this is the best way for continuity.  Avoidance of succession of the business or a succession plan is the killer.  Having only a vague idea of what the succession will look like and not writing it down is not effective communication to other family members and ultimately the business will not survive.  In order for the business to link one generation to the next and maintain continuity the business owner will have to turn an estate planning strategy into a business succession strategy.