Last article I discussed the challenges facing families attempting to pass on the family farm, ranch or other business. Family-owned businesses play a critical role in society. Those of us who reside in rural agricultural areas know this to be especially true.
However, a commonly cited statistic suggests that 70% of family-owned businesses do not survive the transition to the next generation. This is an incredible statistic. Why would this process result in the end of so many businesses? I am convinced that this result is entirely unnecessary.
Before discussing solutions, it is important to identify the obstacles. In my opinion, the obstacles may be different than what many family business owners think. When I discuss this issue with clients or potential clients, they typically identify concerns over complexity and cost. In reality, this thinking may simply be a symptom of the actual obstacle.
This obstacle is the failure to “plan when you can.” The strategy for a successful transition need not be expensive or difficult. But if those concerns prevent you from exploring your options, significant opportunities may be lost. Once the parents are no longer able to operate the business (through death or disability), there may be few options available. In those circumstances, it is not surprising that a family business fails to transition to the next generation.
There are several strategies that can allow you to preserve the value you spent a lifetime building, and set the next generation up for success. However, the first step is to understand the obstacles, then learn the strategies to overcome those obstacles. This need not require a major commitment of time or expense. Yet, this simple step may open possibilities you have not considered. You can then make informed decisions which are best for you and your family. I will discuss this more in upcoming columns.