- Research shows us that approximately, only 30 percent of all family-owned businesses survive into the second generation and only 12 percent will be survive into the third generation. Surprisingly, only 3 percent of all family businesses operate at the fourth generation and beyond. Therefore, making it to the 4th generation is very rare.
Why do businesses fail during transitions?
- Of the 70% of businesses that fail to transition successfully; 60% fail due to problems with communicationand trust. 25% fail due to a lack of preparation from the next generation. 15% fail from all other issues (e.g. poor tax or financial planning, legal advice, etc.) Therefore, roughly 85 percent of business transitions fail due to a lack of communication, trust or next generation competency. JSA Advising, LLC specializes in helping businesses in each of these three areas. Source: Williams and Preisser, 2003
Do family-owned/operated businesses tend to outperform publically owned businesses?
According to a Business Week article, family companies tend to outperform non-family companies for the following reasons:
- Long-term development, training and retention of leaders.
- Tight-knit family members can move quicker than bureaucracies.
- Invest in employee loyalty to increase productivity and reduce turnover.
- Reinvest in the company with a long-term perspective.
- Governance by people with an emotional and financial investment.
Why is this important to our economy?
- More than of all business enterprises in the United States are family owned or Privately held.
- of senior generation family business shareholders have not completed any estate planning other than writing a will, want the business to stay in the family, and are not confident of the next generation’s commitment to the business.
- In the next years, 30% of family-owned firms will experience a change in leadership due to retirement or semi-retirement.
Unless otherwise noted, the source of these statistics is the Unversity of North Carolina:
70% of Family Businesses never make it to the second generation.