Transferring a Family Business to the Next Generation
by Ron Segura
Although some family-run businesses started by one generation continue to thrive when transferred to the next generation, this is rarely the case.
In 1987, John Ward conducted one of the most in-depth studies on how well family businesses continue to perform once parents pass them on to the next generation. Ward’s study revealed:
- About a third of family businesses survive when transferred to the second generation.
- Just 13 percent of family businesses are still in operation by the third generation.
- By the fourth generation, only 3 percent are still in existence.
“These are very sobering statistics,” says Ron Segura, president of Segura Associates, whose firm helps larger cleaning contractors market their services, improve business operations and transition businesses from one generation to the next.
According to Segura, these are the key reasons for this:
Parents never leave: Even though the parents have turned over the business to their sons or daughters, they stay on, making decisions and influencing them on how to run things. This becomes an obstacle that can compromise the entire transfer.
No transfer timeline: A timeline should exist, in writing, detailing when the offspring will take over the business entirely and parents are to be removed from daily business operations.
No new technologies: While the next generation may see the benefits of bringing new technologies into business operations, parents may be against this, which means it never happens.
Emotions: Invariably, emotional issues come up whenever a business is being sold or transferred. But this is amplified when the transfer is made to family members. Often, bringing in an attorney, who will likely be needed to formalize the transfer, can help all parties overcome these emotional tribulations and suggest what is best for all involved.
“While these are the pitfalls, there are also ways to ensure a successful transfer of a family-run business,” adds Segura. “Communication, patience and focusing on what’s best for the business make it happen.”
Segura & Associates was founded by Ron Segura, who now serves as president of the company. Ron has over 45 years of experience in all segments of the professional cleaning and building operation with ten of those years spent as Manager of Janitorial /Document Services for Walt Disney Pictures and Television. Segura & Associates works with clients, helping them operate their facilities in a healthier, more sustainable and efficient manner.