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Family succession challenges independents

Written by Tom Ryan

A recent piece in The New York Times detailed the many challenges owners of health food stores spawned in 1970s and 1980s are facing with succession as they reach typical retirement age.

The challenges include not only trying to monetize a closely-held business, but particularly the complications of selling to a family member and the owner "letting go" emotionally of the business in the process.

The article reminded this writer of hurdles owners of specialty running shops have been facing trying to sell shops they first opened during the first running boom.

PwC's US Family Business Survey that came out earlier this year found:

  • Seventy-three percent of U.S. family businesses admit to not having a documented and robust succession plan;
  • Forty percent found it difficult to hand over control fully to their successors;
  • Fifty-six percent believed they would stay involved in their companies longer than is optimum to ensure a smooth transition.

PwC’s Family Business Survey, 2014-2015, U.S.
Source: PwC’s Family Business Survey, 2014-2015, U.S.

"We are seeing an increase in what we call the 'sticky baton syndrome,' where the older generation hands over management of the firm in theory, but in practice remains in control of what really matters," said Alfred Peguero, PwC's US Family Business Survey Leader, in a statement.

A recent FPA/CNBC Business Owner Succession Planning Survey of small-business advisors similarly found that less than half of owners include family in the succession-planning process, although 31 percent in general wind up selling to family members. Challenges in selling within the family include:

  • Equalizing the business owner's estate with non-employee children (a problem cited by 50 percent or respondents);
  • Distributing executive control among family members and children successors (cited by 45 percent);
  • Uncertainty about family's ability to run the business (cited by 42 percent).

 

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