Recent statistics on business generational transfers follow a 30-13-3 rule – 30% of family owned companies are successfully transferred to the second generation, 13% to the third and only 3% to the fourth. If success and longevity go hand-in-hand, these numbers may seem disconcerting.
One of our past clients who owned a surgical supply company was open to the idea of selling his company to his children. The father/business owner decided that he would put the business up for sale at a fair market price, and if his children could afford to buy it then they could do so. Otherwise the company would go to a third party. Though the children tried, they were not able to come up with the capital needed to purchase their father’s company and it was sold to a third party. One of the children was so furious that he stopped speaking to his father. Did the father, as the business’ owner, make the right choice? (We answer that question at the end of this article.)