What percentage of family businesses fail?

Family businesses are often thought of as the foundation of the American economy. The benefit of the system is said to be the fact that anyone can start a company and build it to the level of success they desire, and they can then leave that business to their heirs if they so choose. 

All of this is true in theory, but the reality is that many family businesses just do not make it for very long after the first generation. There are many reasons for it, and they’re worth considering as you set up a succession plan. 

What the numbers tell us 

According to the statistics from the Harvard Business Review, about 70% of these companies won’t make it to the second generation at all. They’ll fail or be sold off. That just leaves 30% of them in play. 

When you look at the third generation, a mere 10% continue to be passed down. This shows that even the majority of the businesses that make it to the second generation — already a minority in their own right — will fail before going any farther. 

This is why companies with notable longevity will often talk about being founded in a certain year or serving the community for a length of time. A company that can say it has been around for 100 years has severely beaten the odds. 

Your plan impacts the odds of success

Clearly, the odds are stacked against you as a business owner. This is why it’s so important to know how to make a viable business succession plan that gives your family the best chance of keeping your legacy going.

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