In this industry spotlight, we want to highlight key insights into family business succession.
As a young parent, you hold your baby in your arms as you sit at your desk. You are doing all the tasks that you couldn’t get accomplished during the normal business hours. You look at this innocent life and think, “someday baby, you will be sitting in this exact desk, doing these exact chores”. But will they?
As a business owner, you now have another “stakeholder” in your decisions in this new life. Your business must provide great service for your families, must be profitable to provide for your household and now provide more for that household as this new creature has increased your economic liabilities. Yet, with compassion you are thinking you have just begun to train your next generation of business owner.
First, know the odds.
- 30% of all businesses continue within a family to the next generation.
- 20% of all businesses continue after the founder but owned by a non-family member
- Only 12% of all businesses continue within a family to the third generation
However, the trends are changing. The 30% figure is long term, over the last 20 years. Over the past five years, that figure has dropped to 19%. This is due to many factors, but a large part is that Millennials are not wanting to take over traditional family businesses. They would rather sell and invest the cash into an enterprise that gives meaning to them.
To keep a family business alive and well is difficult. Running a funeral business is especially difficult.
- Higher cremation rates, and improper price setting for cremation services, means lower revenue
- Higher costs of payroll and a declining workforce make it more difficult to grow small businesses
- The difficulty of owning a business with large investment into facilities and specialty livery
Running a family business is tough. You need to provide for multiple children, some of whom may not want to be active in the business.
- How do you “split” the business fairly?
- How do you provide equally for children active and those inactive in the business?
- How do you plan an estate during your working years to provide the proper financial security for all stakeholders?
This is one of the services we have offered for four decades!
We help business owners:
- Keep their business profitable
- Know the value of their business
- Set prices that have the best chance of generating more Revenue than Overhead
- Plan for their succession
- either on a hard plan or a contingent plan
- to family member, key people, or third-party successors
A good business succession plan is not a dream, but rather a reality. It is in writing. During a pandemic people go from being alive and healthy to dead in the space of a month. Having the ability to review the plan regularly and make changes and circumstances change. So, hug the baby. Have idyllic thoughts.
Just remember, planning for a business succession is a blend of knowing the values, the people, the risks, and the odds.