For decades now, people have made the claim that most family businesses will not last through the third generation. This shows how challenging it can be to do business succession planning and pass a company down through the family line. By the time the grandchildren are in charge, these studies say, there is a very good chance that the business will go under. They simply cannot sustain the success that the founder enjoyed.
Often, this statistic is reported in a way that makes it sound as if family businesses fail at an exceptionally high rate. But is that actually what’s happening? When you compare family businesses to publicly traded companies, you’ll find that things may not be as dire as they seem. After all, the average company only lasts for 15 years. By this metric, a family business that made it into the third generation would have already outperformed the average company.
How can you increase your chances of success?
As a business owner, the best way to increase the odds that your company will survive through the next generation is to create a business succession plan in advance. Think very carefully about the roles you want different people to have and who you choose to carry on your legacy. Work with these family members to give them on-the-job training. Talk to them about your decisions so that you can resolve any disputes and provide guidance.
After all, it’s not just running a family business that is hard. As the statistics show, it’s difficult for any company to last for two decades or longer. Take the time to carefully look into all of the legal options you have to set your family up for the long-term success you envision for them.