In the 1980’s, the Family Firm Institute did a study showing that about 30% of all family-owned businesses survived into the second generation; about 12% made it to the third generation; and only 3% survived through the fourth generation and beyond.
More recent analytics indicate that more than 90% of generational businesses want nothing to do with the business go forward or its transfer.
Parents impact the sale possibility in the following ways:
- Don’t really understand the global economy…just see risk of ownership going forward
- Don’t totally trust their kids to own/operate the business going forward
- Can’t get their minds around how to fairly treat siblings who are not involved in the biz
- Don’t want to leverage the company to do a transfer
- Still often view/treat their kids as 6 year-olds
Children impact the sale in the following ways:
- Are making $150,000+ a year and getting home in time to have dinner with their kids
- Figure that when the business is sold they will eventually get the cash anyway
- Don’t fully trust the global economy
- Don’t really want to leverage the company to do a transfer
- Often view/treat their parents as authoritarian and out-of-touch with reality
In addition these factors contribute to the failure to exit.
- Emotional attachment: Many family business owners have a strong emotional attachment to their company, and they find it difficult to let go of something they’ve built over the years.
- Lack of planning: Succession planning is crucial for a smooth transfer of ownership, but many family businesses fail to plan for the future. Without a clear plan in place, it’s hard to execute a successful sale.
- Inadequate preparation: Selling a business is a complex process that requires preparation, including financial and legal due diligence, valuation, and marketing. Many family business owners may not have the necessary expertise or resources to prepare for a sale.
- Family dynamics: Family businesses can be complex because of the interplay of family relationships and business dynamics. Disagreements among family members about the future of the business, succession, or the value of the business can complicate the sales process.
- Lack of suitable buyers: Finding a suitable buyer for a family-owned business can be challenging. The pool of potential buyers may be limited to other family members, employees, or competitors, and finding someone who is willing and able to pay the asking price can be difficult.
Overall, selling a family-owned business requires careful planning, preparation, and execution. Business owners should seek professional advice and support to help them navigate the process and maximize the value of their business.