Planning for the Future Has Family-Owned Businesses Falling Short
There are a lot of things that family-owned businesses (FOBs) do better. They’ve made more money and outperformed non-FOBs in the long run, and they’re better at balancing the past and the present. However, when it comes to planning for succession, they are falling short, and without an Ownership Conversion Plan, the future of the business is left uncertain.
A 2012 Harvard Business study found that only 41% of family-owned businesses had an effective CEO succession planning process, versus 56% of non-FOBs. And, it gets worse. That same study found that 63% of family-owned businesses failed to discuss succession on a regular basis. This is all the more chilling when you consider the true cost of not having a plan for the future of your business.
We’ve all heard the story of the ant and the grasshopper. The ant worked hard today, preparing for the dark days ahead. The grasshopper frolicked, putting off the demanding work necessary for surviving the cold winter. Even as you’ve toiled in your business, you may have taken working on it for granted. When you put your business at risk, you’re gambling with the well-being of all those who rely on it, including employees, their families and your community. Those stakes are far too high. Protect your legacy and uplift your business with a transition plan.
There are many reasons why succession planning is delayed. Discussing the next stage of the business is not easy. It can be difficult to picture the business without you at the helm. Because of this discomfort, many families avoid the conversation altogether. In an attempt to keep the peace, the business begins to rely on a false sense of harmony. Unfortunately, the “out of sight, out of mind” approach to business succession has serious repercussions, including hefty taxes, potential family conflicts, and even liquidation of the business.
I experienced this firsthand after my father’s business, which lacked a set plan for the future, was unexpectedly left without a leader. My father’s sudden passing led to great distress and conflict for the family. While the process can be emotionally demanding, and often leads to answering difficult questions about legacy planning, this kind of discord can be circumvented when an Ownership Conversion Plan is utilized.