In towns all across the country, family businesses are part of the community’s backbone. From small manufacturers to service companies to local shops, they all were built by hardworking owners who poured decades of sweat equity into creating something lasting.

Many owners hope that they can pass their legacy on to their children but, sadly, we find that many family-owned businesses don’t transition to the next generation. Instead, they’re sold to outside parties or, in some cases, simply shut down.

Why does this happen? Here are some common reasons we’ve seen and what you can do to prepare your family to successfully own and run the company.

Why Family Businesses Often Don’t Stay in the Family

Work-Life Balance Concerns: Running a family business requires long hours and deep personal involvement. This can be at odds with a generation that desires a more balanced lifestyle that allows them to have more personal and family time than they may have observed from their elders.

Financial Readiness: Even when a son or daughter is interested in keeping the family business alive, they simply don’t have the money. Without preparation, they’re left scrambling to figure out financing or working capital to keep the business operating when their parents are ready to step away.

Different Career Aspirations: Many individuals want to pursue careers that align with their own passions and skills, which may not necessarily coincide with the family business. They might have interests in different industries or professions that they find more fulfilling.

Pressure and Expectations: The weight of living up to family expectations—or the fear of not being able to successfully continue the legacy—can be daunting. This pressure can deter family members from stepping into leadership roles.

Lack of Experience/Training: Running a business is more than just showing up; it’s knowing the books, managing employees, and navigating customer relationships among other things. Too often, younger family members aren’t brought into leadership early enough to be truly ready. Sometimes they are lacking in key leadership skills and that deficit is sometimes overlooked because they are family.

Family Dynamics: Business decisions are hard enough without layering in family history. Sibling rivalries, differing work ethics, or unclear roles can derail even the best intentions.

Owner Reluctance: Many founders hesitate to talk openly about succession because it feels like admitting they won’t be in charge forever—or they fear their family may not want their business at all.

What Owners Can Do to Prepare Their Family

If you’re a business owner, here are some proactive steps surrounding potential transitions:

Start the Conversation Early: Don’t wait until you’re ready to retire. Talk openly with your family about whether they’re interested, and what ownership would mean for them.

Offer Real Training Opportunities: Involve them in financial meetings, customer discussions, and management decisions. The earlier they learn, the more confident they’ll be.

Explore Financial Options: Some owners will choose to gift the business to their children using a lifetime exemption in the tax code which requires a certified valuation. Other owners will want to sell the business. Small Business Administration loans, seller notes, and structured buyouts can make the transition affordable while still giving you a fair return on your investment.

Define Roles Clearly: If multiple children or family members are involved, set expectations early. Who will lead? Who will have ownership? By providing clear roles and expectations in writing, outside advisors can help protect family relationships.

Use Outside Professionals: Attorneys, accountants, coaches, and business brokers can provide guidance, structure, and an unbiased voice that helps keep family dynamics from spilling into the business.

Separate Family and Business: Encourage your family to maintain boundaries. Even if you haven’t always modeled this perfectly, you can start now. Show them that while running a business does demand sacrifice, it’s also healthy (and necessary) to protect personal time and family time.

Running a business with family certainly comes with challenges but keeping it in the family is often possible with the right approach. Treat the transition with the same seriousness as any other deal by planning ahead, including trusted advisors, and putting clear agreements in writing. With thoughtful preparation, you can pass along not just a company, but also the tools, confidence, and foundation your children need to succeed.

If you’re considering gifting, selling, or simply want to explore what a family transition might look like, reach out to us for a confidential conversation. We have handled many internal transitions, and we also have access to many experts who can help with your individual situation to ensure a smooth and positive handoff that protects both your legacy and your family’s future.