The transition of a family-owned business from the first to the second generation is one of the most complex and emotionally charged transitions that both the family and the business can experience. It is a process that does not follow a straightforward plan but rather moves in a series of unpredictable patterns, where both challenges and opportunities can arise along the way. Statistics show that only 30% succeed in transitioning from the first to the second generation, and only 3% make it to the fourth generation.
In this article, we divide the succession process into three key aspects, with the understanding that it is an ongoing process that cannot be broken down into fixed stages. We examine succession from both the founder’s and the next generation’s perspectives, as well as the actual process of succession.
From the pioneer’s perspective: A double-edged sword
The founder of a company has often dedicated most of their life to building and running the business. This creates a strong emotional bond, making it difficult to step back. One of the major pitfalls for the founder is the double-edged challenge of relinquishing control. This reluctance to delegate can lead to a prolonged or even half-hearted succession, causing confusion for the next generation.
Another challenge is that the founder is rarely mentally prepared for the transition. This can result in the decision to transfer the business being made late in the process, where the so-called “window of opportunity” for transferring to the next generation gradually narrows. When this “window of opportunity” closes without a clear plan, a serious pitfall arises. This double-edged sword can lead to uncertainty and stress for the founder, the next generation, and the business.
The succession process: No straight line
Succession should be viewed as a continuous and dynamic process that rarely happens quickly or linearly. Instead, it is a gradual transition that requires ongoing reflection and adjustment. Many fail by assuming that the transfer can be handled as a one-time event. One of the most common pitfalls is the lack of early planning. Preparations should begin several years in advance—ideally 5-10 years before the actual transition—to ensure a smooth handover. Delays can lead to a pressured situation where rushed decisions increase the risk of mistakes. Conversely, a well-planned and gradual succession can create security for the new generation, the founder, and the business. The new generation has time to find their own way of being an owner and possibly a leader of the company, while still having the advice and guidance of the founder.
Another major pitfall that many fall into is inadequate communication about the succession process. When dialogue between generations is limited, misunderstandings and false assumptions can easily arise, leading to unnecessary conflicts. Both the older and younger generations may have different expectations and visions for the future of the business, which are overlooked if both parties do not actively participate in the process. Without open communication, decisions risk being made based on assumptions rather than clear and shared goals. However, it is important that these dialogues do not drag on too long, as they often linger in the subconscious, and prolonged uncertainty can lead to choosing the easiest decision, which is rarely to complete the succession process.
The next generation’s perspective: New challenges and opportunities
For the next generation, it is about finding a balance between respecting the existing legacy and developing their own leadership style. A pitfall here can be that the heirs try too hard to imitate the founder’s leadership style without bringing their own ideas and strengths into play. Or they may want to change everything right from the start. Both approaches can jeopardize the company’s ability to adapt to new times and challenges.
Furthermore, there may be conflicts between siblings over who should take over the leadership or how the company should develop going forward. A common pitfall is that the family’s internal dynamics are not handled openly, which can lead to division. To avoid this, it is important to establish clear roles and expectations for everyone involved and to ensure that there is a fair process for the transfer. Moreover, it is important that these discussions take place in a planned meeting with succession on the agenda and not over the dinner table or at a grandchild’s birthday. No one should fear discussing this difficult subject during a cozy family gathering.
Summary
The transition from the first to the second generation is rarely a straight path but rather a complex journey filled with unpredictable curves. It is a process that requires time, patience, and a continuous ability to adapt to new challenges. By preparing both the founder and the successors for these challenges and addressing potential pitfalls early, the family can create a successful transition that ensures the continued growth and stability of the business—while also preserving the family’s unity and well-being.
We are happy to share our experience with succession and the preparation of the next generation, both domestically and internationally. Feel free to contact us for a non-binding conversation on the subject.
Written by: Managing Director Christina Højfeldt & International Director Lise Møller at The Ownership Company.