According to a 2009 study conducted by The Family Firm Institute, fewer than one-third of family-owned small businesses make it to the second generation, approximately 15 percent to the third and just 3 percent to the fourth and beyond.
It can be hard to focus on succession planning when the day-to-day tasks associated with running a small enterprise are so demanding. This is especially the case in periods of economic uncertainty. Because of this, many companies don't start planning for succession when they're supposed to – ideally five to 10 years before a projected transition, such as when the current owner will reach retirement age.
However, it's important to have a financial plan in place so the business can be prepared for the next phase. This could involve a sale, a dissolution or a transition to a family member or business partner.
Representatives at a community bank can help entrepreneurs navigate the tricky issue of succession and put a comprehensive plan in place that allows their companies to be well prepared for changes in leadership.