The Centrality of Trust and Communication in Wealth Transfer
In today’s Wichita Eagle business section, I have an article entitled “Family-owned businesses still power U.S. economy.†There are actually two main points in the article.
First, many people do not realize how many family-owned businesses there are – 89 per cent of all U.S. businesses. And these companies create 78 percent of all new jobs in our economy. Common examples of family-run businesses are restaurants, trucking companies, residential construction companies, auto dealerships, and all of the construction-related trades (electricians, plumbers, heating and air conditioning, roofers). As a result, the health of family owned businesses is crucial to the U.S. economy – and more focus and attention is being given to them.
The second issue is that the transfer of family owned companies across generations typically doesn’t go well – with only 30% successfully transferring to the second generation, and only 10% to the third generation. Previously, this has been attributed to estate taxes, but research now suggests that up to 70% of the failure rate of business succession is directly linked to a lack of trust and communication within the family.
So if you are in a family owned business, you really should be paying as much (if not more) attention to how well you are getting along as a family, maintaining connectedness and trust, as you do to planning for estate taxes. Think about it – be proactive and don’t let walls build up among family members. Talk. Meet together (and not just about business). And keep the lines of communication open – it will pay huge dividends for you and the business in the future.
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