Family outfits account for nearly all business activity in the U.S., but most don’t have a plan for the future. If you’ve got a business to take care of now and in the future, it’s never too early to take steps for preservation.
Surveys suggest that up to 90% of all business comes from family operations, which adds up to over 60% of the country’s gross domestic product. Those big numbers mean big responsibility, but maybe more daunting is how to keep your company contributing long after you’re gone.
Staying the course
Even if your family-run business is a tight ship now, it could quickly start to spring leaks when you’re no longer here to steer:
- Around 30% can make it to the second generation
- 12% last long enough to pass to the third generation
- 3% are still operating when the fourth generations and beyond take over
Crafting a plan
It’s best to form a solid plan for transitioning from one family member to the next to make sure your business stays strong for the generations to come:
- Valuation: Finding an accurate price tag can be difficult, and you’ll have to determine which system works for you. Looking at similar business, taking stock of assets or projecting with income could all help you nail down the worth.
- Communication: Conveying your wishes will be just as important as hearing your family out. It may surprise you who wants what kind of responsibility going forward, and you might have to change your plan in accordance with their wishes.
- Determination: Finally, you’ll have to set some things in stone. You’ll want to outline what roles family members take, any parts of the company that you’ll sell off and what the transition looks like for management and training.
Passing control of your business can be extremely stressful and complicated, but ultimately satisfying when done with proper care. Make sure you understand what a transition takes, and you could have a business that stands the test of time.