For the last several columns I have addressed critical steps for parents who desire to pass on the farm, ranch or other business to the next generation. Last column, I gave the example in which one child wants to own/operate the business but the others are not interested. How do you divide the estate? One way is to let all the children have a share of the profits but only one child makes the business decisions.
Posts Tagged ‘Business Transition’
Successfully operating a family business - and preparing to pass it on - may seem like separate issues. In reality, they are not. The strengths, skills and persistence that built a successful business can also help prepare that business for a successful transition. That is why it is difficult to watch the value of a family’s most significant asset evaporate for failure to “plan when you can.”
Once you have committed to identify your options, the next step to a successful transition is to identify your desired result. This may sound simple but it seems to be where most business owners stall because they can’t see how to get from where they are to where they want to be.
Last column 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, according to the Harvard Business Review, 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.
A substantial part of my practice is spent helping families prepare to pass on the family farm, ranch or other business. Given that this is usually the family’s largest asset; it is critical this be done properly.
Unfortunately, the majority of family businesses fail transitioning to the next generation. However, the likelihood of success dramatically increases when the family prepares for this transition. As the second generation owner of a firm started by my father almost 50 years ago, I understand the importance of this issue personally and professionally.