Success through succession: when your business is stitched with family ties.

• Author: Hengesbaugh, Mark Gerard
• Position: Family Business

IT'S TOUGH TO SUGARCOAT the odds. If fourth-generation candymaker Rachel Sweet-Martin succeeds her father Tony as president and CEO of Sweet Candy Company, the Salt Lake firm will have accomplished a milestone achieved only three times in 100 tries among family-owned businesses.

Succession--the transmission of ownership and control of 4 business from one generation of family to the next--is one of the prickliest issues facing family businesses. Yet solving the problem is critical for long-term viability and profitability. Until a succession plan is in place, the future of a family-owned company is uncertain, not only for family members, but for suppliers, customers and non-family employees as well.

The term "family business" is inherently problematic. Family relationships operate on high-voltage emotion, while business relationships must be grounded and function rationally. For this reason, solving the succession problem within a family business involves navigating an emotional minefield of sibling rivalry, parental dominance, and fear of loss of personal power and status. It also means recognizing that career expectations differ between generations.

The odds are against family succession. About 30 percent of family-owned businesses survive into the second generation, and 12 percent are viable into the third generation. Only three percent operate at the fourth-generation level and beyond, according to the Family Firm Institute (FFI), an organization of family businesses, consultants, educators and researchers.

Family Survival

30 percent of family owned businesses survive into the second generation.

12 percent will still be viable into the third generation.

3 percent will be operating at the fourth generation level and beyond.

--Source: Family Firm Institute The cumulative effect of the succession problem becomes obvious considering how many businesses are. family owned. "Family businesses are everywhere," says family business consultant W. Gibb Dyer, O.L. Stone Professor of Entrepreneurship at Brigham Young University's Marriott School. "Utah banks have traditionally been family affairs, with the Simmons family at Zions and Eccles at First Security. Another example is the Cannon brothers at Geneva Steel. Family control of U.S. businesses is very common."

And the above aren't exceptions--the bulk aren't just a lot of mom-and-pop shops, either. Eighty to 90 percent of U.S. wealth is tied up in family businesses, including 37 percent of...