According to Forbes, only one third of all family businesses in the US make the transition to the second generation…that’s appalling…and sad. To be honest, this number makes me cringe every time I see it. Because it doesn’t have to be so low…it should be closer to two thirds in my opinion.
There’s ONE primary reason this number is so low.
PLANNING…or should I say a lack of planning. Without question, this is the number one “generation transition killer” from my experience. I talk to hundreds of business owners…small and large…and they all fail to do the proper planning. Or maybe I should say the proper “timely planning.”
The key is TIMELY PLANNING
Timely planning means you create your plans well ahead of the event (transition). The most common issue with regard to planning is that it is done in too short of a time frame that doesn’t allow the right things to happen at the right time.
Take for instance, a business owner I know wanted to give it to his son and his son wanted to run the business. It was a great dream that both sides were excited about and thinking about for a long time. But they never did any actual planning to make it happen, just talked about it. Unfortunately, the father fell on some hard times health wise. Because there weren’t any plans in place, the son was ill prepared to take over and run the business. His heart was in the right place, he just hadn’t been given the proper training to run the business.
As it turns out, the business ended up being sold rather than passed along to his son to run. There were certain stipulations that allowed the son to work there and continue his career with the business but he wasn’t prepared to run it. This could have been prevented and the son could have owned the business and continued making it a success if they had both done some planning years before the fathers health issues took a toll on him and the business.
Some simple steps to start planning for succession
There are a few simple steps you can take that will start you on your way to a positive outcome for succession. While there are many details around these steps, these should be a guide to help you as you move from the “dream about succession” to the reality of making it happen.
If a business owner follows these overall steps and guidelines to business transition and succession, their odds of achieving the dream they started out with go up significantly. When you look at the 2/3 of the family businesses that fail to transition, I can guarantee you that somewhere along the line they missed or didn’t follow one of the above steps. Creating Your Concierge CounselSM was born out of this issue…with the primary goal to significantly improve the odds of a successful transition and succession to future generations.