When it comes to family businesses and the success rate of passing them down to younger generations, there are some surprising statistics you should know. 

For one, the average life span of family businesses is just 24 years. In addition, only about 40% of family-owned businesses in the US transition into second-generation businesses. Even more, only 13% are passed down successfully to a third generation, and less than 3% make it beyond. 

So, is there a reason why third-generation family businesses do not succeed or continue? Or, is there a third-generation curse? Spoiler alert – one of the biggest issues when it comes to family business generational transitions is having a hard time ‘letting go’. 

Of course, knowing that is just the first part. Actionable tips to avoid this common family-run business problem are the second. That’s why we have put together the top tips and best practices on how to turn over a family business to younger generations successfully. 

Tip #1 – Be Flexible 

One of the biggest mistakes made when transitioning a family business to the next generation is not being flexible. When the senior  generation sticks to  their ways it can make it difficult for the junior  generation to succeed, especially when implementing new strategies.. By holding on to certain practices, values, or ideas the older generation can be setting up the younger generation for failure. That’s why it’s key to be flexible and go with the flow of the younger generations taking the reigns. While you may think ‘you know best’ keep in mind that you have been training and preparing your successor for this exact moment for quite some time. Trust in your mentorship and  the groundwork you’ve laid for the next generation’s success. 

Tip #2 – Prepare for Changes

With that said, being prepared for changes can help the initial shock of changes when younger generations take over. When you plan, strategize, and execute a well-thought-out family business succession plan, then you already know that  changes will take place. You are  more emotionally and mentally prepared to handle any operational changes when the family business generational transition occurs. 

Another key statistic to know is that most family businesses fail due to the founder’s death. According to one survey conducted by the University of Connecticut Family Business Program, 47.7% of family businesses failed after their founder passed, with 29.8% failing after a sudden or unexpected passing. Your family business succession plan should be prioritized along with your will and estate plan in case of any untimely events. 

Tip #3 – Managing Dialogue & Key Players 

Involve your key business leaders.  Working with your key players and engaging in productive dialogue before beginning family business generational transitions is important. Non-family employees  may have questions or lingering concerns  with family members in the business.. Having open, honest, and thoughtful conversations with employees and family can set everyone up for a smooth and successful family business succession in  addition to helping the owner feel comfortable with the team in place. By knowing everyone’s true feelings and thoughts ahead of time, you can work through any issues before the transition occurs. 

Tip #4 – Teamwork Makes The Dream Work 

The best guide to  ironing out issues amongst family and family business partners is teamwork with a collaborative spirit. That’s right, the saying ‘teamwork makes the dream work’ even applies when figuring out how to turn over a family business. Most successful family-run businesses will hire a third-party consultant to help lead the process, mediate any issues, and support the transition work with a unbiased and balanced voice of reason. 

Partnering for Success 

When you are managing your family business’ day-to-day operations, the bigger scope of things can be the last thing on your mind. To continue the success of your  business, planning ahead for and with the future generations is crucial. Luckily, Double Iron Consulting can help. 

As family business owners ourselves, we at Double Iron know what it takes to succeed. Our unique package of services helps navigate the challenges of managing your business in a way that preserves relationships and promotes strategic growth while concurrently managing  family business succession generational transitions. 

We are  here for your business today so you will build a lasting legacy tomorrow. Contact Double Iron to begin partnering for current and future success.