As many baby boomer business owners make plans to retire in the near future, their mostly millennial children—who would be second-, third- and, in some cases, fourth-generation owners of the family business—are weighing their options.
Maybe a company’s heirs-to-be don’t want to have to pack up and return to their hometowns in order to run the business. Or perhaps they’ve already tested the waters and determined that they simply aren’t passionate about their family’s line of business. What’s more, the potential successor could resent their parents for seemingly forcing them to follow in their footsteps, instead of forging their own career path.
Whatever the reason, Camm Morton, a certified exit planning adviser based in Baton Rouge, has heard them all and more.
“It’s staggering how few businesses survive the third generation,” says Morton, owner and principal of VR Business Sales | Mergers and Acquisitions.
To be specific, some 30% of family businesses survive into the second generation, while 12% make it to the third generation and only about 3% of all family businesses operate into the fourth generation and beyond, according to The Family Business Institute.
Yet despite these statistics, Morton says less than 10% of business owners have a written exit plan. That’s a scary thought, he says, with roughly 80% of U.S. businesses owned by baby boomers who could retire within the next few years,
Further complicating matters are the family dynamics that can come into play during the sale of an heirloom business. The process takes months and things can get dicey.
Read the full story from the latest edition of Business Report.