3 in 4 family-run businesses don’t have succession plan, poll finds

It's estimated that 50 percent of gross domestic product in the U.S. is attributable to family-run businesses and generate 60 percent of the country's employment. However, the structure of these companies may be at risk, as a majority of family businesses have not implemented a succession plan, based on the results of a recent study.

Nearly 75 percent of family business have yet to implement a "robust succession plan," particularly among leadership positions, according to a new report from accounting firm PricewaterhouseCoopers.

Additionally, it's estimated that two in five executives of family-run businesses will find it hard to hand off their company to the next generation once they decide to retire, the study found. More than half of respondents in the survey – 56 percent – said that they intend to stay involved in the company whenever they decide to make the handoff.

Alfred Peguero, PwC survey leader for family business, indicated that this is a classic case of what's known as "sticky baton syndrome."

"[This is where] the older generation hands over management of the firm in theory, but in practice remains in control of what really matters," said Peguero. "As the generational gap widens, the period between each transition gets longer."

He added that as a result, heirs or successors to a family-run business get started at a distinct disadvantage, not having done the things that make for a smooth transition.

"There needs to be a flexible long-term succession plan that includes rotations in senior management positions across the business, in addition to having work experience outside the family company," he said. "This will not only transfer valuable skills, but also help successors gain credibility and trust among key stakeholders."

8 in 10 family businesses expect to grow in coming years
Small businesses are the lifeblood of the U.S. economy, and owners anticipate growth. Over the next five years, 80 percent of respondents in the PwC poll said that they anticipate stronger returns, evidenced from increased revenue and customer traffic.

Business succession not only requires training – a key component of an effective financial plan – but employment help. In December, the jobless rate fell to 5.6 percent, the lowest rate in more than six and a half years. However, there still are plenty of people who are struggling to find full-time work. Nearly 1 in 3 part-time workers say they want to work 40 hours per week, but haven't been able to find it, according to a recent CareerBuilder survey, suggesting that small business owners should have plenty of potential hires to consider.

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