Why many first-generation family agribusinesses don't survive their founders: Part 1

Lack of succession planning is one of the key reasons why so many family agribusinesses fail to last, writes Trevor Dickinson. Very few businesses that are simply ‘handed over’ in an informal manner will survive.

- Trevor Dickinson

Approximately 70% of all family businesses are either sold or liquidated after the death or retirement of their founders. The failure of these businesses beyond the tenure of their founders has serious social and economic consequences.

The liquidation of a family agribusiness constitutes a loss not only to the proprietary family, which often has most of its assets tied up in the farm, but also to the employees and surrounding community, whose economic well-being depends on the survival of the business.

One of the most significant factors determining the continuity of the family agribusiness from one generation to the next is whether the succession process is planned. Succession planning means making the preparations necessary to ensure the harmony of the family and the continuity of the family agribusiness through to the next generation. These preparations must be thought of in terms of the future needs of both the business and the family.

First-generation family agribusinesses are heavily dependent on the founders, not only for their leadership and drive but also for their connections and technical know-how. Failure to plan for succession needlessly deprives the business of these crucial managerial assets.

In addition, if succession planning is avoided, the founder’s unexpected death can force a major upheaval in the pattern of authority and ownership distribution. In this situation, conflict among the founder’s heirs often becomes so intense that they are unable to make the strategic decisions needed to ensure the future of the family agribusiness.