Early financial training can help foolproof family businesses

The old adage “Shirtsleeves to shirtsleeves in three generations” plays out all too often, but with some planning, families can boost the chance of avoiding a similar fate.

In many cases, an older generation starts with nothing, works hard and amasses wealth. However, their progeny have no success in managing that wealth and, by the time their great-grandchildren are in charge, the family is back at square one, with nothing to show.

Typically, the more distant in the past the person who created the wealth, the more likely his or her descendants will lose it. In fact, according to studies by the Harvard Business Review and Family Business Institute, only 30 percent of family-owned businesses survive into the second generation, 12 percent are still viable into the third generation, and only about 3 percent operate into the fourth generation and beyond.

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