Family businesses are very common in the United States. For many people, it is their only source of income for themselves and their families. People often tend to think of their businesses as a legacy, as well, so they want to leave it to the next generation.
When they do so, it is important to take time to think about proper business succession planning. Below are some important statistics that can help demonstrate why this is so crucial.
The majority of new jobs
To begin with, family-owned businesses reportedly create 78% of the new jobs in the United States. They also make up 60% of the overall workforce in the U.S.
Husband and wife teams
These businesses are often owned jointly by husbands and wives. This is the case for 1.2 million family-owned small businesses. That said, there is a wide range in the overall size of these companies. Some are just couples, while others are Fortune 500 companies with thousands of employees.
A challenging success rate
When looking at long-term success, there can be some significant challenges. Only 30% of family businesses make it to the second generation. Only 12% of those businesses then make it to the third generation. This shows why business succession planning is so important to preserve the long-term viability of the company.
Many owners have not identified a successor
Finally, some reports indicate that a full 47% of business owners have not chosen a successor, even though they plan to retire within the next five years.
Business succession planning takes time, and it is critical to provide on-the-job training to the successor. Being without one and so close to retirement age increases the odds that the business will fail as it passes to the next generation.
If you are a business owner, you need to think about your business succession planning in advance. Take the time to carefully consider your legal options.