Keeping it in the Family Excerpted from: Planning a Family & Business Legacy Learn More

Let's examine the issues around the transfer of business ownership. Here are some interesting statistics developed by the Small Business Administration:

• Over 90 percent of all business enterprises in North America, and the majority of businesses internationally, are family owned.
• Nearly 35 percent of Fortune 500 companies are family owned.
• Family businesses account for 78 percent of all new job creation, 60 percent of the nation's employment and 50 percent of GDP.

Based on this information, it's easy to see the importance of preserving family businesses. However, that doesn't seem to be happening. Consider these facts:

• Only 30 percent of all family-owned businesses survive into the second generation.
• Only 12 percent make it to the third generation.
• Only 3 percent of all family businesses continue to operate at the fourth generation level and beyond.

Compounding the problem is the fact that, according to a recent survey, 39 percent of family-owned firms expect to experience a change in leadership due to retirement or semi-retirement in the next five years!

Of course the aging of the baby-boom population, many of whom are business owners, further exacerbates the problem. As baby-boomer owners grow older and die, someone has to assume leadership of the businesses left behind. In spite of that obvious fact, studies show that only 25 percent of senior family business owners have completed any estate planning, other than writing a will, even though 81 percent say they want the business to stay in the family.

A Gallup poll reveals that:

• 72 percent of family-owned businesses do not have a formal business continuation plan.
• 47 percent have done no estate planning at all.
• Only 7 percent have hired professionals to help deal with the family relationship issues involved in planning for the continuation of the business.

Clearly, something is preventing families with small businesses from doing the necessary planning to assure the survival of the business. Simple procrastination may be part of the problem, but family dynamics may be a more likely barrier.

Many times, the challenges of creating a satisfactory plan and the fear of losing control over the fate of the business make it very difficult for the current owner or owners to take the first step in planning for succession. Add to that the common tendency to procrastinate and you almost have to wonder how any planning ever gets done among family business owners. Have you and your family faced the issue of business succession honestly and openly? The future of the family business may depend upon it.