According to Forbes magazine, there are roughly 4 million Baby Boomers who own and operate their own businesses. It also reported that many business owners have 80% or more of their personal assets in their businesses and that an estimated $10 trillion in business assets may be transferred by the Boomers by 2025. (Source: Forbes, Why Small Businesses Are Feeling Economic Crunch, October 11, 2015.) Others have reported even higher dollar transfers over the next several decades.
Perhaps unsurprisingly, the contribution made by family-owned businesses to the GNP (Gross National Product) of the United States has been estimated at over 50%. The same article reported that approximately 90% of all U.S. businesses are family-owned or controlled. (Source: Forbes, Entrepreneurs, The Facts of Family Business, July 31, 2013.)
Question: With such importance to U.S. families and the U.S. economy, how do these companies perform when it comes to passing themselves on to successor generations? Answer: Not very well.
When it comes to transitioning to future generations, U.S. family-owned businesses are very fragile. It has been estimated that only one-third of family businesses survive the transition from the first to the second generation of ownership, while only 12% are viable into the third generation. (Source: Family Business Institute.) Further, according to the National Association of Corporate Directors, fewer than 25% of private companies have a succession plan in place.
In a country as wealthy and sophisticated as the U.S., this is surprising if not stunning news. If only we had experienced and trained professionals available to advise and assist these companies as they make these important transitions. On second thought, we do!
James “Jim” Hart, founder of Lightfoot Group, LLC assists private and family-owned businesses with significant business challenges, management and ownership transitions and interim management. He can be reached at firstname.lastname@example.org and at 678-320-0079. This article is designed to provide general information and is not intended to provide specific legal, accounting, tax or other professional advice. You should consult your professional advisors for assistance with respect to any matter discussed in this article.
© 2018 James F. Hart, Lightfoot Group, LLC