The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Kevin Spafford is Farm Journal’s succession planning expert for the Farm Journal Legacy Project. He hosts the nationally-televised ‘Leave a Legacy’ TV, facilitates an ongoing series of workshops for farm families across the U.S., and is the author of Legacy by Design: Succession Planning for Agribusiness Owners.
The failure rate is enormous. 70% of first generation family businesses will not successfully transition to the next generation. Of the survivors, 90% will not transition to the third and of the very few remaining, 96% will not reach the fourth generation operations. As a family business owner, you know the statistics. You may even be able to recite the reasons most family business owners fail – 1) Inadequate Estate Planning, 2) Insufficient Capitalization, and 3) Failure to prepare the next generation for a leadership role.
Leadership may be the single biggest gap in any succession intention. It may sound trite, but after all the legal work is complete, the buy/sell agreements are in place, the life insurance is paid for and the teams of advisors are back at their respective offices, someone still has to run the operation. Today that opportunity and obligation falls on you, the controlling generation. Tomorrow it may be your sons, daughters, managers and key employees. Are they ready to lead?
Use these questions to check your operation's leadership readiness.
What is your source for these failure rates? 70% failure according to whom??
Thanks for the question. The statistics are based on research by the Family Firm Institute, Inc. (200 Lincoln Street, #201, Boston MA 02111, 617-482-3045, FFI.org). FFI is an international professional membership organization for advising and research for family business.