Sep 2, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin

A Successful Transition to the Next Generation

June 30, 2012
By: Kevin Spafford, Farm Journal Columnist

A successful transition to the next generation can be defined in many different ways—which means there are consequences to the decisions that are made early in the planning process.

Recently, I came across a survey I had tucked away for future reading. The survey, called "Family to Family: Laird Norton Tyee Family Business Survey 2007," suggests that family businesses might be failing on many fronts: from demographics to planning, leadership to financial security. As I reviewed the results, I examined my own assumptions to reflect on the opportunities we might have to correct course.

From this survey, we learn that: 

  • 60% of all majority shareowners in family businesses were age 55 or older in 2007, and nearly 30% were older than 65. 
  • Fewer than 30% of respondents had a written succession plan. 
  • Fewer than 40% had a successor in line and were preparing for transition. 
  • A startling 64% of respondents did not require family members entering the business to have the qualifications or experience necessary to be successful. 
  • 25% of respondents said the next generation is not competent to move into a leadership position. 
  • 93% of respondents had little or no income diversification.

 

Given the depth and breadth of the available information, along with the outreach by the Farm Journal Legacy Project and other resources, neglecting to plan is indefensible. We know that most family-owned businesses will fail in the transition from one generation to the next. In fact, 70% will fail in the transition from first to second generation. Of those that survive, 90% will fail to transition to a third generation. And, of the meager few remaining, 96% will not make it to a fourth.

A comprehensive plan for generational transfer should include provisions for an ownership transition, spelling out the who, when and how. It should also include provisions for financial security, including each family member’s financial resources, retirement budget, buyout scenario and capital for the transition; a leadership development plan for each leadership candidate; an education, experience and mentor-based development plan; and provisions to mitigate the estate tax no matter how the government chooses to apply its terms and conditions.

Success depends on the decisions you make and the actions you take. Begin now to create a better future.

Read these four columns featured in the story: 

Build Your Dream Farm

What’s an Official Operating Agreement?

Non-Farming Landlords Need Succession, Too

Help to Overcome Succession Hiccups

See Comments

FEATURED IN: Legacy Project - Legacy Project 2012 Report
RELATED TOPICS: Legacy Project

 
Log In or Sign Up to comment

COMMENTS

No comments have been posted



Name:

Comments:

Legacy Newsletter

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 

Follow Us

Facebook Twitter You Tube
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions