Fewer Family Businesses to be Passed to Next Generation
Posted On January 31, 2017
I’ve written in this space before about the need for succession planning. The long-term viability of your business may depend on it – particularly for family-owned business that want to maintain family control.
But PwC’s annual family business survey found a decreasing number of owners who planned to keep their businesses in the family.
Of the survey respondents who foresaw a change in ownership within the next five years – admittedly a small number at 17 percent – only 52 percent were planning to pass their companies down to another family member. That’s the lowest number since 2010, according to PwC, and more than a 20 percent drop from two years ago.
Among companies expecting any change in ownership to come beyond five years, 69 percent expected to keep the business in the family compared to 79 percent two years ago.
Only 41 percent of the survey’s respondents expected the next generation of their families to both own and run the business within the next five years, down from 48 percent two years ago. While only 11 percent of those who expected a change in ownership in the next five years had planned to bring in outside managers to help run the company under family ownership (down from 26 percent), 61 percent of the respondents as a whole expected to bring in outside management help.
Nearly a third of the respondents said they’ll be seeking outside buyers within the next few years, up from 19 percent two years ago.
And the PwC survey found even fewer respondents who had a succession plan than the 2016 Kreischer Miller report we referenced back in May – just 23 percent. Why bother if you’re just going to sell anyway, right?
So what are we to take from this? Is this a condemnation of the Gen-Xers or millennials who would be the next in line, an admission that the Slacker Generation and the Participation Trophy Generation are unequipped to take the reins? Or is this a statement on the times, an economy that is growing tougher to navigate and a marketplace in which it’s tougher for a company to stand out and distinguish itself?
There’s no one answer – each firm’s situation is likely different. Some simply may not have successors who are ready or even willing to take over. If you grow up in the family shoe store, you might be ready to build houses for a living, or sell insurance, or write blogs about generational distinctions.
But growing competition from the internet and elsewhere may also require some fresh thinking. Eighty-seven percent of the respondents to the PwC survey said they planned to achieve their growth goals by selling the same products and services as they always had, and only 11 percent planned to diversify.
Sometimes it might take more than a new generation to see the need for change. It might take a fresh, unaffiliated set of eyes.