47.7% of family business collapses occur because of the death of the founder. Succession issues can be detrimental to a family business’s future. Incomplete, untested or complete lack of a plan can cause turmoil within the family, impact the profitability of the business, and affect employees and their families. The current generation of ownership’s failure to take the appropriate steps or push for a transition plan is typically what creates the collapse.
30.5% of family business owners have no plan to retire, ever. This does not mean you should eliminate creating a succession plan. If the owner becomes ill, dies or is otherwise incapable of continuing in their current capacity, what will happen to the business? Having an organized, written succession plan allows a family business to either continue on to future generations or will be key to ensuring a company sells at fair terms.
Every succession plan should have a Plan B that includes what to do if the selected leaders to run the family business are not meeting goals. It should also include when to go to Plan C, which may be to sell the business before material value is lost. With an aging Baby Boomer population at an average age of 67, owners can lose material family wealth that they have accumulated by not documenting and testing their succession.
16.4% in the success rate in a business transitioning without a succession plan. Developing an exit and succession plan will help create long-term security for a family. A written strategy, created with an outside professional, will provide an objective perspective, set everyone’s expectations as to what will happen with the family, and establish when to begin the transition process. This can alleviate family infighting or other issues when the planned or unexpected time comes for the next generation to take control of the business.