Succession Planning for Your Family Business—What is Hindering You?

Your son is a salesman like you. Your daughter is a financial wiz. Surely, they plan to take over the reins of the family business. Your dream is to build your own business and leave a supportive legacy for your family. This exit plan sounds normal and good but, without a sincere examination of your family, a few things might be hindering your next step for the future of your business.

Family businesses are the life-blood of American commerce, representing nearly 90% of all businesses. They contribute most of the GNP and employ more people than all public businesses combined. According to the Family Business Institute, 88% of current family business owners believe the business will remain in the hands of the family for years to come. Sadly, these expectations are unrealistic because only 30% of businesses transfer to the next generation—and the biggest reason is the lack of succession planning.

Hindrances to Family Succession Planning

1. Getting the Word Out. Some families are very candid, but an alarming number have difficulty talking about death or plans for worst case scenarios. Get comfortable talking about the future and what it might hold.

2. No interest. The fact may be that adult children of business owners would rather work on their own projects than be tied to their parents’ dream. Have a candid talk with all family members to assess what is realistic, and plan around shared goals.

3. Family disputes. Old grudges and divorces can make family succession unbearable. Even if few arguments exist now, they are likely to come up. Pre-planning for ownership rights in the unfortunate situation of death or divorce can keep the business thriving in times of trouble.

4. Financial Status. Determining a business’s worth within a family can be subjective. Most family business owners do not have a good understanding of their business’s real value. Hiring an objective evaluator will provide more accurate discussions around numbers so that family members can plan succession or sale with good financial knowledge.

5. Estate Planning. The AARP estimates that 60% of Americans have no will or trust in place, and that’s the easy one to get completed. With so little planning, is it any wonder that business are not able to succeed to family members? There are so many providers of these services, so start the conversation and keep it going.

6. Looking Beyond Family. First generation owners may discover there is simply no interest in fulfilling the dream of a multi-generational family business, yet find it even harder to imagine a stranger running a business they’ve started from scratch. Most business owners sell to non-family members though, so it would be much easier to understand this as a smart goal to plan around rather than one of despair that the family is not a part of it

Once these emotional and cultural family hurdles are overcome, you will find myriad resources for how to get your succession plan in order. Some simple steps and advice will ensure longevity or successful exits from your business. But first, understand what preconceptions and family needs are holding you back so you can move forward with a solid exit strategy that satisfies the whole family.

Author Profile Jon Forknell is the Vice President and General Manager of Atlas Business Solutions, Inc., a software marketing company specializing in employee scheduling software, including ScheduleBase employee scheduling software, and other business software solutions. In the past, Jon has been recognized by the U.S. Small Business Administration as a SBA Young Entrepreneur of the Year. Atlas Business Solutions was named as one of Software Magazine’s Top 500 Software Companies in 2004 through 2007, and 2010, 2013, 2014, 2016, 2017, and 2018.