\u201cKeeping the Family Business Healthy\u201d<\/a> by Dr. John Ward, only about 30% of family businesses successfully transition to the second generation. Roughly 12% survive into the third generation, and a sobering 3%-5% make it to the fourth generation and beyond.<\/p>\nThese aren\u2019t abstract statistics. They represent companies that quietly stagnate, get sold under pressure or fade away after decades of hard work.<\/p>\n
This usually isn\u2019t about bad products or lazy heirs. It\u2019s about a silent risk hiding in plain sight: next-generation stall-out.<\/p>\n
Why family businesses struggle to transition<\/p>\n
The reasons are well documented \u2014 and painfully familiar to anyone who has spent time inside a family enterprise.<\/p>\n
Lack of planning tops the list. Fewer than half of retiring owners have formally chosen or prepared a successor. Many assume things will \u201cwork themselves out.\u201d They almost never do.<\/p>\n
Emotional and communication issues come next. Unspoken expectations, unresolved sibling dynamics and competing visions for the future can derail even strong businesses. Families often avoid difficult conversations in the name of harmony, only to create bigger problems later.<\/p>\n
Then there\u2019s resistance to change. Sometimes the next generation lacks readiness or confidence. Other times, the family resists professionalizing the business \u2014 adding outside leadership, formal governance or modern systems \u2014 because \u201cthat\u2019s not how we\u2019ve always done it.\u201d<\/p>\n
Layer on one more reality: The baby boomer generation has held onto ownership longer than any generation before it. Many postponed succession planning while markets were strong and founders remained capable. The result is compressed timelines and real gaps in next-generation preparedness just as transitions are becoming unavoidable.<\/p>\n
A new complication: Value and liquidity<\/p>\n
There\u2019s another challenge today\u2019s families face that didn\u2019t exist at the same scale 30 years ago. Many Lehigh Valley businesses have grown substantially in value under baby boomer ownership, often exceeding federal and state lifetime estate tax exemptions.<\/p>\n
That creates a liquidity problem. Businesses may be valuable on paper but cash-constrained in reality. Without planning, families can face forced sales, excessive debt or painful compromises simply to pay taxes.<\/p>\n
Shifting the mindset: From transaction to continuity<\/p>\n
Avoiding a next-generation stall-out requires a fundamental shift in thinking.\u00a0Too many owners frame succession as a narrow question: Who is buying my stock? The better question is: How does this enterprise continue to thrive across generations?<\/p>\n
That shift \u2014 from ownership transfer to enterprise continuity \u2014 changes everything.<\/p>\n
It starts with intentional next-generation development. Future leaders need real responsibility, clear expectations, coaching, leadership development and time to grow \u2014 not ceremonial titles or last-minute promotions.<\/p>\n
It requires a deliberate liquidity strategy, one that balances reinvestment in the business, debt service, shareholder dividends and taxes. Liquidity doesn\u2019t happen by accident.<\/p>\n
Just as critical is thoughtful estate planning, which too often lags far behind business success. Trust structures, coordinated estate plans, insurance strategies and proactive tax planning are no longer optional once enterprise values rise. When done well, estate\u00a0planning isn\u2019t about death \u2014 it\u2019s about preserving options, protecting the enterprise and giving the next generation room to lead without starting under a financial chokehold.<\/p>\n
It also means adopting modern governance. Many families benefit from formal boards for operating companies, separate oversight for real estate entities and clearer decision-making structures. As complexity grows, some families build a broader enterprise approach that includes operating businesses, real estate, asset protection, estate planning and ongoing wealth creation.<\/p>\n
Finally \u2014 and most overlooked \u2014 it requires family governance. A family council and a written family constitution can clarify shared values, purpose and vision, while defining how the family interacts with the business and resolves conflict before it becomes destructive.<\/p>\n
The choice facing the valley<\/p>\n
The Lehigh Valley is entering a pivotal transition period. Thousands of family businesses will change hands in the coming decade. Some will thrive across generations. Others will stall quietly, then disappear.<\/p>\n
The difference won\u2019t be luck. It will be preparation.<\/p>\n
The family businesses that survive the next decade won\u2019t be the ones with the best history \u2014 they\u2019ll be the ones willing to design a future before it\u2019s forced on them.<\/p>\n
Succession doesn\u2019t fail because families don\u2019t care; it fails because they wait too long, talk too little and mistake hope for a plan.<\/p>\n
This is a contributed opinion column. Tom Garrity is founder and managing partner of Compass Point Family Business Consulting in Bethlehem, where they advise family-owned companies on strategy, leadership, succession, ownership transitions, governance and family dynamics. He brings more than 40 years working in and with family businesses, including experience as president of two family-owned manufacturing companies with domestic and international operations.<\/p>\n","protected":false},"excerpt":{"rendered":"According to the U.S. Census Bureau\u2019s 2023 Annual Business Survey, approximately 27% of U.S. businesses are family-owned. The…\n","protected":false},"author":2,"featured_media":82366,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[119,121,120,60,182,139,432],"class_list":{"0":"post-82365","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-allentown","8":"tag-allentown","9":"tag-allentown-headlines","10":"tag-allentown-news","11":"tag-business","12":"tag-local-news","13":"tag-news","14":"tag-top-stories-tmc"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/82365","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/comments?post=82365"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/82365\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media\/82366"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media?parent=82365"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/categories?post=82365"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/tags?post=82365"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}