The majority of U.S. family businesses are not succession-ready, and may not be prepared for a transition or a market sale, says a new study by Baker Tilly Virchow Krause, a national accounting firm with operations in Southfield.
“For family owned businesses, it can no longer be assumed that the eldest child will take over the leadership of the business when the parent is ready to retire,” says Mark Smith, a partner in Baker Tilly’s private client group. “Having a succession plan in place can help ensure the transfer of knowledge, skills, and wealth are taken into account to maintain business continuity and to preserve the capital value of the business.”
The study found more than 70 percent of those surveyed don’t see a compelling reason to pass their business to a family member, and would consider selling their business. The report found the greatest challenge faced by families was ensuring the fair distribution of assets among family members.
The study also compared business succession in the United States with other countries. The No. 1 trigger for beginning the succession process in the United States was advice from external parties, including estate planning and taxation advice.
In other countries, the top trigger was a readiness to step down. The study found conflict in the succession planning process is more common in the United States than in other countries. Baker Tilly found 10 percent of U.S. respondents reported that the next top executive would be a daughter, compared with nearly 20 percent on a global scale.
To download the full report, click here.