Ownership Succession

Posted on: June 13, 2017
Tags: Succession Planning

Ownership Succession – Are You Ready???

All family business owners will transition ownership at some point.  That is a given.  The question that all owners should address is how and when do I transition ownership?  This decision may be the most significant individual decision they will ever make for their business.  Yet, the vast majority of owners are not ready for this decision and don’t know how to get ready.

State of Readiness:

A number of studies have looked at the current state of “readiness” of family held businesses to transition to new owners or to the next generation.  The research indicates that too many family businesses are NOT ready to transition and do not have a plan to do so. 

A 2016 survey conducted by the Exit Planning Institute showed how unprepared family businesses really are for ownership transition.  Here is a summary of the survey's findings:

Boomer Aged Business Owners:

  • Own 63% of private businesses in the US
  • 80-90% of their wealth is tied up in their business
  • 76% (4,500,000 businesses) plan to transition in the next 10 years
  • Transition of $10 trillion of wealth!!

Historical Success Rates:

  • 50% of exits are NOT voluntary – 5 D’s (death, disability, divorce, distress, disagreement)
  • 12 months after selling, 75% of owners “profoundly regretted” the decision
  • 70-80% of private businesses put on the market don’t sell

Family owned business survival rate:

  • 30% to 2nd generation
  • 12% to 3rd generation
  • 3% to 4th generation 

Succession Planning:

  • 80% have no formal succession plan, and 50% have done no planning at all
  • 75% of owners have not clearly defined their “life after the business”
  • 68% are not familiar with all of their transition options
  • 88% have no formal transition advisory team
  • 85% have not engaged a Board of Directors/Advisors


Barriers to Planning Your Succession:

Reasons always exist for family business owners not to plan for their succession.  Some are too busy running the company.  Some know they should do the planning, but just never get around to it.  It’s not a priority.  And some do not know where to start. What is keeping you from planning your succession?

Take Action Now:

If you’ve not completed a comprehensive ownership succession plan, you should begin the process NOW.  It may be the single biggest wealth creating decision you will ever make.  So, begin the planning process now! 

The process begins with engaging professional advisors.  Engaging an estate planning expert and a financial advisor is a great start. In addition, we believe engaging a Board of Advisors is critical to ensure a plan is devised that meets the needs of Owners, Family Members, and Management.  This fresh perspective is critical to ensure all stakeholders’ goals are defined and the best-case scenario is developed and executed.  Such a plan must be developed in conjunction with the Company’s strategic plan. 

Integres can help you through this critical planning phase. Contact us today to discuss how we can help you define and achieve your goals.