I’ve guided dozens of Michigan family businesses through succession planning over the past 30 years. Want to know what keeps me up at night? Watching good families destroy both their relationships and their businesses because they avoided one crucial conversation.
The statistics are brutal. Research shows that only 30% of family businesses survive to the second generation. Only 12% make it to the third generation. And only 3% survive to the fourth generation or beyond.
This isn’t because the businesses fail financially. Most are profitable when the transition happens. They fail because families can’t navigate the emotional minefield of succession planning.
What is succession in family business?
Succession in family business is the process of transferring ownership, leadership, and knowledge from one generation to the next. It’s not just about legal documents or tax planning. It’s about managing family dynamics while protecting what you’ve built.
Family business succession planning differs fundamentally from selling to outsiders. When you sell to a third party, money solves most problems. In family succession, money often creates them.
The unique challenge of family succession
In a normal business sale, buyer and seller have clear roles. Negotiate price, sign papers, walk away. Clean.
Family succession mixes business decisions with family emotions. Your buyer is your daughter. Your employee is your son. Your board member is your brother-in-law. Nothing is clean.
The five reasons family business succession fails
After working with hundreds of Michigan family businesses, I’ve identified five recurring patterns that doom succession planning for family business.
Reason 1: The conversation never happens
This is the most common cause of failure. The current owner avoids discussing succession because it means confronting mortality, letting go, or disappointing children.
Years pass. The owner keeps saying “someday we’ll talk about it.” Someday becomes never.
Then something forces the issue – health crisis, death, divorce, partnership dispute. The family has to make critical decisions during crisis mode with zero preparation.
The Michigan manufacturing example
I worked with a family-owned Tier 2 auto parts supplier. Three generations, 150 employees, $15M annual revenue. Founder in his 70s, never discussed succession.
Heart attack at 72 forced everything. Two sons, one daughter, all working in the business. Nobody knew who would take over. No documentation. No plan. No discussions.
The family spent $200,000 in legal fees fighting each other. Lost their biggest customer during the chaos. Eventually sold to a competitor for 40% below market value.
All preventable with honest conversations 5-10 years earlier.
Reason 2: Assumptions replace communication
“Dad always said the business would go to me.” “Mom promised I’d run operations.” “My siblings don’t really want it anyway.”
These assumptions destroy families. What the founder said 15 years ago during a casual conversation becomes interpreted as binding commitment.
The expectation gap
Parents assume their children understand the plan. Children assume parents have promised certain roles. Siblings assume they know what each other wants.
Nobody actually talks about it directly. When succession happens, everyone’s shocked to discover others had completely different expectations.
Reason 3: Fairness versus equality
This is where family business succession planning gets really complicated. Parents want to be “fair” to all children. But fair doesn’t mean equal when some children work in the business and others don’t.
The common scenario
Three siblings. One has worked in the business for 20 years, developed relationships, learned operations, and earned $80K annually while building someone else’s equity.
The other two pursued different careers, make $150K+ at their jobs, and have never been involved in the business.
Owner wants to be “fair” and leave the business equally to all three children. But is that actually fair?
The child who built the business gets the same ownership as siblings who contributed nothing. That child feels cheated. The other siblings feel entitled because “family is family.”
The Michigan family restaurant
I advised a third-generation restaurant group in Grand Rapids. Five locations, $8M revenue. Two children active in the business for 15+ years. Two children with no involvement.
Owner’s will split ownership equally four ways. The working children were furious. The non-working children had majority control and wanted to sell immediately to cash out.
The working children lost the business they built. The family stopped speaking to each other. Thanksgiving is apparently awkward.
Reason 4: No training or preparation
Parents assume their children can run the business because they grew up around it. That’s like assuming your kids can perform surgery because you’re a doctor.
The knowledge transfer problem
Running a business requires specific skills and knowledge. Most family business owners have decades of accumulated wisdom:
- Customer relationships and history
- Supplier negotiations and agreements
- Employee management and personalities
- Crisis management and problem-solving
- Financial management and cash flow
- Industry trends and competitive intelligence
This knowledge doesn’t transfer through osmosis. It requires intentional, systematic training over years.
The unprepared successor
I’ve watched capable children struggle to run family businesses because parents never actually trained them. They worked IN the business, but never learned to run it.
One Michigan manufacturing successor told me: “I knew how to run machines. I had no idea how to run the company. Dad never taught me the business side.”
The business struggled for three years while he learned on the job. Lost 30% of revenue. Half the management team quit. Dad’s legacy nearly destroyed.
Reason 5: Tax and legal planning happens too late
Most families wait until the owner is ready to transition before thinking about structure. By then, most tax optimization strategies are off the table.
The tax surprise
Michigan has no state inheritance tax, but federal estate taxes still apply. Business value over $13M per individual triggers 40% federal estate tax.
Without advance planning, families often have to sell the business just to pay the tax bill. I’ve seen this destroy family succession plans that took years to build.
The structure matters
Proper succession planning for family business uses structures like:
- Gifting strategies spread over multiple years
- Family limited partnerships or LLCs
- Grantor retained annuity trusts (GRATs)
- Intentionally defective grantor trusts (IDGTs)
These strategies require 5-10 years to implement properly. Starting during the succession year? Too late.
The emotional dynamics nobody talks about
The business stuff is actually the easy part. The family dynamics kill most succession plans.
Sibling rivalry
Competition between siblings that started in childhood explodes during succession. Who’s more capable? Who did Dad love more? Who deserves to run the company?
I’ve mediated situations where 50-year-old executives are essentially fighting about who got more Christmas presents in 1982. It sounds absurd, but it happens constantly.
Spouse involvement
Your daughter-in-law has opinions about how the business should run. Your son-in-law thinks he should have a role. Spouses see their family’s financial security tied to succession decisions.
Suddenly you’re not managing three children’s succession. You’re managing three children plus their spouses, each with their own agendas and insecurities.
The retirement resistance
Many owners claim they want to retire but can’t actually let go. They “transition” out but still make all major decisions, undermining the successor’s authority.
Employees don’t know who’s really in charge. Customers go around the successor to the founder. The successor is set up to fail.
What successful family business succession looks like
I’ve guided successful family transitions. They all share common elements.
Early and honest communication
Families that succeed start discussions 5-10 years before planned transition. Everyone talks honestly about expectations, concerns, and desires.
These conversations are uncomfortable. That’s fine. Uncomfortable conversations in a conference room beat family feuds in court.
Clear selection criteria
How is the successor chosen? Oldest child? Most competent? Most interested? Combinations of these?
Successful families establish clear, objective criteria early. Everyone knows what’s required to lead the business. No surprises.
Professional facilitation
Most families need outside help. I work with family business consultants who specialize in these dynamics. They help families have productive conversations that wouldn’t happen otherwise.
Investment: $10,000-$50,000. Value: Preserving family relationships and business value worth millions.
Systematic training programs
The best successions involve 3-5 year training programs. Successors work in multiple roles, learn every function, build relationships, and gradually assume leadership.
By transition time, they’re ready. Employees respect them. Customers trust them. The founder can truly retire.
Fair doesn’t mean equal
Successful families distinguish between fairness and equality. Children active in the business get ownership. Other children get equivalent value through other assets or insurance.
Everyone is treated fairly. Not everyone gets the same thing. And everyone understands why.
What to do if you’re facing succession
Whether you’re the current owner or the potential successor, here’s how to increase success odds.
Start the conversation now
Schedule a family meeting. Bring in a professional facilitator if needed. Discuss honestly:
- Who wants to lead the business?
- Who’s prepared to lead?
- What does fair look like for everyone?
- What’s the timeline?
- What training is needed?
Get professional help
Don’t try to navigate this alone. You need specialists:
- Family business consultant for dynamics
- Tax attorney for structure
- Business valuation expert for fair pricing
- Succession planning advisor for coordination
Document everything
Write down agreements. Create formal succession plans. Don’t rely on verbal promises or assumptions.
Legal documentation protects everyone and prevents misunderstandings that destroy families.
Let’s talk about your family business
I’ve helped Michigan family businesses navigate succession successfully. I’ve also helped families clean up failed succession attempts.
Trust me – planning ahead is cheaper and less painful.
Free confidential consultation
I offer free consultations for family business succession planning. We’ll discuss:
- Your current family dynamics and challenges
- Timeline and readiness assessment
- What needs to happen for successful transition
- How to start difficult conversations
- Resources and support available
Call me directly: (248) 957-0300
Everything stays confidential. No pressure. Just honest guidance from someone who’s seen this process dozens of times.
Your legacy is bigger than the business
You didn’t build your business just to watch it destroy your family. But without proper succession planning, that’s exactly what happens.
The good news? Every succession failure is preventable. The patterns are predictable. The solutions are known. You just need to start early and get professional help.
Your business represents decades of work. Your family represents everything. Don’t let poor succession planning destroy either.
Start the conversation today. Your family’s future depends on it.