WASHINGTON (June 2, 2016) — Is the deck stacked against family-owned businesses? Statistics seem to bear out that harsh reality. Only a third of those entities successfully make the transition to a second generation.
By the third generation, 95 percent of family businesses are under new ownership.
This means that owners of family businesses — if they are truly serious about their businesses staying in the family — cannot begin soon enough to establish a succession plan, according to Michael Evans, national managing director of the Newport Board Group, a nationwide business strategy advisory firm.
Those family members must make sure a company's plan for the future is as airtight as possible, he said.
Sometimes the negatives in a family business doom a family succession plan at the start, according to Mr. Evans. The next generation may not be interested in continuing to operate the business, or capable of taking it over, or family disagreements can cripple attempts to maintain the business.
“You need to run the business as a business first, with appropriate family participation,” Mr. Evans told Tire Business.
“But there are examples both ways. Bill Ford still leads Ford (Motor Co.), while Warren Buffett took over (H. J. Heinz Co.)”
A well-run family business enjoys advantages that other businesses do not, according to Mr. Evans. It earns tremendous market advantages through the goodwill of customers, communities and employees, and it can establish a significant presence in industry segments across the U.S. economy.
But many family businesses also have issues, cultures and traditions that complicate the issue of succession, he said.
To ensure a smooth succession, family businesses must balance family and business values, with succession plans that take into consideration the overlapping roles and responsibilities of family members.