Chapter 11
Deciding What to Do about the Family Company
In This Chapter
Why parallel planning for the family and the business is crucial
Facts about family-owned companies
How families hurt their business’s valuation without even knowing it
Ways to constructively manage family conflicts
Families own or control 90 percent of U.S. businesses. According to the Family Business Forum at the University of North Carolina in Asheville, only 30 percent make it into the second generation, and only 12 percent survive into the third. Fourth generation? Only 3 percent. A family business that makes it past one generation is a success story. Past two generations, it practically becomes a headline. Past three, it’s a dynasty.
If you want to see a valuation fight that’s possibly uglier than a divorce, just watch kids fighting over leadership of the family business or the money they think is coming to them. Family companies that last require plenty of planning, preparation, and open communication between family members and their advisors. When businesses pass from one generation to the next, they must plan for many contingencies. For example, in a family with several siblings, brothers and sisters working in the family business may feel they have a greater right to the company’s control and assets than the siblings who haven’t. These types of valuation squabbles are common in families that haven’t planned.
This chapter details which specific actions to take to plan for transitions in the family ...
