How many businesses make it through the second generation?

You started the business you own from nothing. Maybe, like so many famous companies, you started in your garage. Now your company is worth millions. You hope to pass it on to the children and see them make it even bigger and more successful, given the advantage they have of not starting with nothing.

But will it happen? How likely is it that the business will thrive?

You’re going to get different statistics depending on who you ask, but one expert claimed that less than 66% of family businesses make it through the second generation. After that, a mere 13% make it through three generations. Or, roughly a third of all companies are going to fail in the second generation, while the vast majority die out after that.

Does that sound daunting? It doesn’t have to be, but it does show the challenges your family faces. Just because you were able to take nothing and make something viable does not mean your children are going to double your success easily. In reality, it will take a lot of work for them to keep the company at the level it is when you leave it to them, and it will be stunning if they can pass it on and see their children run it the same way.

With this in mind, you can understand why comprehensive business succession planning is such an important part of estate planning. The more that you can do to help swing the odds in your children’s favor, the greater the chances that they can take your company and help it thrive.


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