All in the Family

Despite inherent challenges, succession planning is essential to maintain the legacy of family businesses.

May 29, 2015

NEW YORK – Succession planning can be a fraught topic for any business owner, but even more so when company founders are their ones with the name on the door, according to a recent Bloomberg article. When a company’s business reputation is so closely intertwined with a family’s personal reputation, founders often are reluctant to hand the reins over to heirs.

An unfortunate side effect of this tendency is that they may do very little succession planning. Bloomberg cites daunting statistics from the Family Business Institute: Only 30% of family businesses survive into the second generation, just 12% are viable into the third generation and a mere 3% beyond that.

“So many entrepreneurs are control-oriented, and that makes it easy for them to say, ‘I’ll deal with succession later,’?” Charles Mueller, Northern Trust executive vice president and director for trust and financial advisory services, told the news source.

While experts recognize that the primary challenge is often caused by the elder generation not being ready to hand over the reins, it’s also essential to recognize whether the succeeding generation wants to take those reins.

Bloomberg looked at Hirshleifers, a multigenerational clothing retailer based in Manhasset, New York. It is currently run by the great-great-granddaughters of the original founder who started the business over a century ago. Upon taking over the business from their father after his death a decade ago, the women realized that despite their ongoing involvement, their father had closely guarded important information about vendors, finances and other matters. In spite of the rocky start, the three siblings have bucked the statistics, more than tripling sales since they took over Hirshleifers .

This is particularly unique for siblings, who all-too-often fight about everything when inheriting a family business, from who’s in charge to how to run the company. But, the time is now coming for the Baby Boomer sisters to begin forming their own succession plan, preparing their children to take charge someday.

Advertisement
Advertisement
Advertisement