There are two common reasons why families don’t retain their businesses.
First: there is no qualified successor. Even if your business will not be passed down to the next generation, you must take steps to ensure the value of your business survives. This is really just another form of succession planning.
Second: a lack of planning. Though most of us are careful to safeguard our personal assets, for example, insuring our homes, many businesspeople do not plan ahead to safeguard the value of their business.
For business owners, their business is their single largest asset in terms of value. Their business also represents a major source of self-esteem and personal worth. Therefore, thinking about how they might exit the business means they must come to grips with personal identity issues. Consequently, many just don’t want to think about the day when they retire and are no longer running the business.
In addition to the fear of retirement, the business succession process must deal with the business owner’s death.
Finally, there is one more tough issue that is easy to put off: picking one child as your successor while being fair to all your children. This decision is that much tougher for family farm owners given that the family home is often transferred to the child that will run the farm and it may mean that both you and your other children will have to leave the farm as part of the succession plan. In addition, the farm may only support one family.
All of these issues are difficult. It takes time to thoughtfully address these issues. Planning for your succession is therefore a process rather than an event.