As a smaller community and smaller state family owned or closely held business are the norm for us in Minot and in North Dakota. Unfortunately due to the smaller nature of the business and the communities they serve the fundamental step of transition planning is often ignored.
Inattention to succession planning is a substantial problem for many family businesses in the United States. A recent study found that owners of 69 percent of the family businesses surveyed expected ownership of the business to continue in the next generation, but only 23 percent had a robust, documented business succession plan. Some of the problems that can arise when the owners cease to maintain control there is no formal succession plan in place :
Next generation is unprepared, reluctant or unable to lead the business;
The stakeholders of family may not be all in on the choice of successor; and
There may not be sufficient liquidity to transition.
Most family business plan and focus on long term performance and the future due to their nature and the community level that they serve. Failure to plan for a succession is at odds with this general principle. Most executives of the family business set forth a 10 or 20 year horizon for the next generation but then fail to install a plan to transition the business to that generation.
To be fair, one reason why so many family businesses do not engage in proper succession planning is because it is difficult and complex. Family business succession planning must take account of countless unknown future circumstances and current facts that are continuously changing and interacting, including business factors like the economy, the regulatory environment, and the state of the market in which the business operates, as well as family factors like family dynamics and the changing skills, maturity, career objectives, economic needs, and health status of individual family members.
Our firm has the experience and expertise to help you put together a step by step transition plan specifically tailored to you and your business dynamic.