- Author Chris Hadjiyianni
- Year Date 2019
- Location Winnipeg
- Category Business
What could be easier than transferring your family business to its natural successor: your heirs apparent, your offspring? If some of your first guesses were peace in the Middle East, increasing honesty in politics, or convincing a teenager that he or she might be wrong about something, you have probably witnessed your share of family-business transfer disasters.
Statistics widely quoted by Estate Planning writers indicate that “only” one-third of all family-owned business are passed on to the second generation, and “only” 10% of family owned businesses are transferred to a third generation. Experience indicates that those statistics are wildly optimistic and overstated.
Pessimism notwithstanding, some family businesses are indeed successfully transferred to younger generations. For the transfer of business ownership and control from parent to child to be deemed “successful,” the parents must achieve all their Exit Objectives,including the following:
1. Financial independence and security completely divorced from reliance on cash flow from the business.
2. Intra-family fairness regarding the distribution of family wealth and businesses.
3. Complete transfer of business operation and ownership control to the younger generation. This usually means the parent is out of the business and is not needed in the business for any reason.
If it is so difficult to successfully transfer a business from one generation to the next, is there a way to improve the likelihood of success? Better yet, is there a no-fail recipe? This white paper will approach these questions and lay out strategies to help improve the chances that you transfer your business to your family successfully.