The Business Succession Crisis
According to the New York Post, only 30% of businesses are successfully passed from the first generation to the second. Only 9% make it to the third and virtually zero to the fourth. The aftermath of a failed business means unemployment, unpaid bills, public resources used up, bankruptcy, and a legacy of nothing. Just one failed closely-held business with 4 employees and an owner typically costs the state around a half million dollars. That is in lost taxes paid, unemployment benefits, welfare benefits, spending privately, not to mention the distant ripple effects.
We applaud the efforts of states to keep businesses open during natural disasters and we have written on the subject in order to aid businesses to keep operations open. Ironically, states are doing very little to prevent the day-by-day disasters of businesses closing their doors forever.
As attorneys we have been doing business succession and valuation work for the past 40 years and we have had nearly all of our clients pass their business from one generation to the next or from a seller to a buyer successfully. The biggest issue (that we’ve seen) tends to be that people wait too long to plan. We would encourage any business owner to start talking this process out and to find help with the process in a professional.