Lessons in Transition: Strengthening the Next Generation

By Bob Rodgers, SBTDC Asheville

Note: This is the second of a two-part series.

In the last issue, we discussed how nearly 70 percent of family businesses fail to make it to the second generation, often due to delayed succession planning, leadership gaps, and unresolved family dynamics rather than financial issues. The good news is that while the failure rate is high, it’s not inevitable. The families that do get it right tend to follow a handful of consistent practicesand most of them have less to do with finance and more to do with discipline, communication, and preparation. As a business counselor, you can help guide families in putting these steps in place early to maximize the chances of success for the next generation.

Start Early and Develop Strong Leadership

One of the biggest differences in successful transitions is that they start early. Not “a year before retirement” early, but five to ten years out. That kind of runway allows founders to step back gradually and gives the next generation time to grow into leadership rather than be thrown into it. It also takes the pressure off decision-making. When families aren’t rushed, they tend to make better, more thoughtful choices.

Another key factor is how the next generation is developed. In strong transitions, successors aren’t just handed titles, they’re trained. They spend time in different parts of the business, learn how the financials really work, and often gain experience outside the company before stepping into leadership. Just as important, they’re given real responsibility while the founder is still around to coach them. That combination of experience plus mentorship builds both competence and credibility.

Clear roles also make a huge difference, especially in families with multiple children involved. The businesses that avoid internal conflict are the ones that define who is responsible for what, and who ultimately makes the final decisions. It sounds simple, but it’s often overlooked. Without that clarity, even highly capable siblings can end up working against each other instead of alongside each other.

Strengthen Communication and Structure

Communication is another area where successful families stand out. They talk early and often about expectations, ownership, and the future of the business. These aren’t always easy conversations, but avoiding them often leads to problems later. The families that navigate this well create space for honest discussion, even when there’s disagreement, and they don’t wait until a crisis forces the issue.

Many of the stronger family businesses also make a point of separating “family decisions” from “business decisions.” That might mean creating a simple advisory board, bringing in outside perspectives, or even just formalizing how major decisions get made. The goal isn’t to overcomplicate things, it’s to create enough structure that decisions don’t come down to personalities or emotions in the moment.

Another important shift is how founders think about fairness. Instead of trying to treat everyone exactly the same, successful families focus on what’s fair for both the business and the individuals involved. That might mean one child leads the company while others remain owners, or that assets outside the business are used to balance things out. It’s not always equal, but it’s intentional and clearly communicated.

Finally, the founder’s transition itself is often what makes or breaks the process. The most successful founders don’t disappear overnight, but they also don’t hold on indefinitely. They shift into a mentoring or advisory role and allow the next generation to truly lead. Ideally, that process should occur over a period of a few years, gradually transitioning decision-making responsibilities to the successor. That handoff of authority, not just responsibility, is what signals to employees, customers, and the family that the transition is real.

For business counselors, the opportunity here is significant. With so many transitions coming in the next decade, helping families put these practices in place early can have a lasting impact; not just on the business, but on the family itself. Because when succession is done well, it doesn’t just preserve a company, it strengthens the foundation for the next generation to build something even better.