Apparently not, says Tom Deans, a former business owner whoÂ has beenÂ president of a large family business for almost a decade. Only a third of family businesses (90% of businesses today are family owned) succeed in passing along a business to the next generation and continue to build wealth. Why? Itâ€™s an emotional issue. If youâ€™ve received the gift of a business, its very hard to sell it. Secondly, the responsibility of continuing the notion that they must leave a legacy makes wealth extraction very difficult. Thirdly, sons and daughters may lack the skill sets, the passion, and interest to effectively operate the business.
Whatâ€™s the best solution? Sell the business, donâ€™t gift it. Give money, not a business. The company should be valued at a fair price and if the next generation wants to buy in, then that is a more successful transaction, says Tom Deans. Read more from his book â€śEvery Familyâ€™s Businessâ€ť to understand how to communicate succession planning issues amongst family members.