I recently had the privilege to hear New York Times best selling author Thomas William Deans speak. Tom is the author of two best sellers on family businesses – “Every Family’s Business” and “Willing Wisdom”. The overriding theme of Tom’s books and his presentations is that family’s need to do a better job of dealing with business succession.
Family businesses are born out of love. A business owner doesn’t invite his/her children into the business because they dislike them. However, the success of generational business transfers is terrible. The statistics don’t lie. According to Deans, less than 3% of family businesses survive to the third generation. Of the companies making up the Fortune 500 in 1970, a full one-third had vanished just 13 years later – evidence that size and reputation are a guarantee of generational legacy (Every Family’s Business, 2014).
What’s happening? Why do so many owners lack the foresight, objectivity and wisdom to sell their business when it’s at its highest value? Why do parents pass businesses to their children when the business is nearing the end of its life-cycle or the children are not strong successors?
Strategic planning in a family business, like any business, is critical. It’s easier said than done though. There needs to be a dedicated commitment to open and honest communication and family meetings with a facilitator.; all on a regular basis. These are all very difficult things within a family. It takes a lot of discipline but in the long run it’s critical for success. A Certified Exit Planning Advisor (CEPA) can be your best place to start.