The matter of succession planning is something that gets a lot of focus from family businesses, and for good reason – it is one of the hardest things for both the business and the family to go through.

To give some context, people often quote statistics that only 30% of family firms make it to the second generation, 13% to the third and only 3% to the fourth generation or beyond. With the construction sector accounting for nearly a fifth of the five million family owned businesses in the UK, getting succession planning right is important to the long term health of the sector. 

However, these statistics miss the bigger picture, which is more positive and best explained through a case study:

Case study: third generation logistics business

The third generation leaders of this company had grown a successful business with eight sites across the country. They had three children, all with successful careers but no involvement in the business. The family decided that that they wanted to stay in business together, but not in the business of their parents. 

The family realised that the company had a substantial real estate portfolio that could generate greater returns than the operating business. They decided to sell the business and focus instead on property investment. A Family Council was established, including the three children, to oversee the management team that had been brought in to run the real estate portfolio.

Taking a narrow view, the operating business did not make it to the fourth generation. But the wider family enterprise continued with a defined role for the fourth generation.

What does succession planning mean?

The term “succession planning” means different things to different people. It generally involves a few things: