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When it comes to managing a successful family business, the head of the family is often reluctant to share control and involve other family members in the process. Perhaps it’s a matter of pride, control, or a combination of factors, but the scenario is common among modern day family business owners.

But do you know what would happen to your family business if you became incapacitated or died, unexpectedly? Who would step in to manage day-to-day operations? Even if you have a successor in mind, is that successor even capable of running the business? Many business owners have no idea. Consider the hypothetical case of Jack and Karen Parker, who own a family business. Jack, 55, runs the business while Karen, 53, is busy with the social work career she resumed after raising the couple’s three children. Jack dies suddenly leaving Karen—who has never been involved in the business—as its sole owner. A daughter who works in the business wants to take over but has no ownership or control or the experience to run the business. The children who don’t work in the business want their mother to sell, but its value has declined rapidly since Jack has died without a named successor. The value of the business will erode more if it loses key customers.

This less than ideal scenario is quite common. Many family business owners put so much energy into operating their business—while also attending to their family lives—that they have little time or energy left to think about much else. They are busy doing what they do best: running a successful business. That may be part of the reason only 30 percent of family businesses survive into a second generation of family leadership and just 12 percent are still operating into the third generation, according to The Family Business Institute. Ideally, succession planning should begin the day you take over a business. Of course, that isn’t always realistic given the amount of work it takes to operate a family business, but succession planning needs to be a top priority for every business owner.

Every family business needs two plans: a short-term plan—in case you become incapacitated or die suddenly—and a long-term plan that addresses your retirement.

Please see important disclosures at the end of the article.

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