Video: How to Make Sure The Family Business Stays in The Family
Updated: Dec 28, 2018
Only 30 percent of family-owned businesses successfully pass from the first generation to the second generation.
Most businesses in America are Family Businesses. Family-owned businesses make up about 90 % of all businesses in the United States, According to the U.S. Bureau of the Census. It is most Entrepreneurs' dream to, one day, pass their businesses off to their children.
This idea is what drives most founding businesses owners. They hope to provide better lives for their children than they had. The thing is, most family businesses do not stay in the family past the founding generation.
What is a Family business?
A family business is a commercial organization in which decision-making is influenced by multiple generations of a family — related by blood or marriage or adoption — who has both the ability to influence the vision of the business and the willingness to use this ability to pursue distinctive goals.
Family businesses account for about 60% of all employment in the United States and are responsible for about 78% of all new jobs created each year. Most people may not realize this, but some of the largest corporations in America are family businesses. Companies like Walmart, Koch Enterprises, Ford Motor Company, and Cargill are all Family-owned companies.
Challenges Family businesses face.
Despite the vital role family-owned businesses play in the U.S economy, and the benefits one can extract from running a business with loved ones. There are various challenges, old and new, family-owned businesses face today.
For starters, it is very difficult for the founding family member to successfully transfer the business to their kids. In fact, only 30 percent of family-owned businesses successfully pass from the first generation to the second generation. The data gets even more discouraging when it comes to the third generation, with only 12% of businesses being successfully transferred to the third generation of family members.
One major reason for the decline in succession is that most business owners do not plan, or plan poorly for the transfer of their businesses to other family members. Consider this, 47% of current family business owners expect to retire in the next five years but do not have a succession plan in place.