The majority of businesses in the United States are formed with family involvement. This is true of 77% of small businesses, according to some reports.
At the same time, reports have found that the majority of these businesses will not make it to the next generation. Most of them will fail or be sold under the care of the original owner, and others will fail after being passed to the second generation.
As a business owner, you certainly don’t want this to happen to your family business. So let’s look at some of the reasons why it does.
Poor succession planning
First and foremost, some business owners do not do a good job of succession planning in advance. Never assume that things are going to go smoothly. Even if you’re just working with your adult children, you still need a plan in place.
The children don’t have your skill
There’s also a chance that your heirs simply aren’t going to have the same skills and abilities that you do. These are what made the company great. Some recommend outsourcing to bring on the talent that you need to keep the family business going.
They get in disputes
Finally, many family businesses fail because the children who are trying to run the company end up in disputes. They may not agree on who gets to make decisions or how much compensation to take. Eventually, these disputes erode the relationships between them and they have to dissolve the business.
Planning in advance is one of the best ways that you can prevent all of this from happening. Make sure you know what legal steps to take.