In the British monarchy, the eldest son of the current ruler has always been the legitimate successor to the crown. If there were no sons, then the eldest daughter stepped up – hence the great queens Victoria, Elizabeth I and II. This system has been in place for hundreds of years and while it provided a structured approach to who gets to be in charge, it didn’t always work out for the best. There were sometimes better choices in the wings but they were excluded from the throne. This tradition, embedded in British law, carried over to wealthy families and their businesses.
Today, many family business owners have the same mindset. According to a recent PWC survey “41% of family firms plan to pass ownership and management of the business to the next generation.” That might make sense, but it might not.
A common challenge is that there is no open discussion about the assumption the eldest son will take over.
- Perhaps the parent is waiting for the right time to broach the topic; but the right time never arrives.
- Perhaps there are serious concerns about the ability, maturity, and responsibility that that individual has demonstrated.
- Perhaps the owner thinks another family member is better suited, but wants to avoid conflict.
- Perhaps they are not convinced that any of their children are capable of running the business; but there are assumptions based on promises made in the past.
Whatever the reason behind the reluctance to discuss the elephant in the room, avoidance and procrastination are no excuse for abdicating your responsibility to choose the best solution for the benefit of the company, the employees, the customers, and your family. If you don’t, you risk becoming an unfortunate statistic.
According to the Family Business Institute, 70% of businesses do not survive into the second generation and 88% don’t survive to the third generation. Failure is hard on everyone, but especially the successor.
It may be time to think outside the box and consider the diverse array of options.
- If you want to keep it in the family, are there other family members more qualified or more passionate? Daughters, cousins, in-laws?
- Think outside the family: do you have managers or a management team who might do a better job?
- Consider an ESOP (Employee Share Ownership Program) in which some or all of your employees become shareholders and buy you out.
- Could you sell to a competitor or a supplier?
- Are there foreign buyers interested in expanding into Canada?
- Are there immigrants who might have difficulty pursuing their former careers, but who are prepared to take on a business opportunity?
Having a son and a business doesn’t mean you automatically hand it over to him. Diversify your thinking.