A new report finds most family businesses have succession plans, but only about half say those plans are comprehensive as leadership transitions accelerate.
Leadership transitions are becoming an increasingly urgent issue for family-owned businesses, creating new opportunities for financial advisors to help clients navigate one of the most significant moments in preserving both a business and a family’s long-term wealth.
According to a new report from Deloitte, 40% of family businesses are either currently undergoing or expect to undergo a leadership transition within the next decade. While 82% of businesses report having some form of succession plan, only about half describe those plans as thorough and well developed.
The findings suggest that many family enterprises have begun planning but may still lack the governance structures and leadership preparation needed for a successful transition.
The report shone a spotlight on the biggest challenges when it comes to next-gen succession. Thirty-five percent of respondents said the next generation lacks sufficient experience or qualifications, while 33% cited difficulty identifying an appropriate successor. Another 32% said current leaders are reluctant to relinquish control.
Confidence in leadership readiness also remains limited. Globally just 48% of respondents said they are highly confident in the preparedness of current family leadership, while confidence falls to 37% for the next generation, leaving a majority uncertain about future leadership.
As a result, more family businesses appear to be willing to look beyond the family for executive leadership. Deloitte found the share of businesses expecting to appoint an external CEO after succession is projected to double, rising from 13% today to 26% following leadership transitions.
Even as outside executives become more common, younger family members are already taking on influential responsibilities inside the business. About half currently lead functions including technology, sales and marketing, philanthropy and research and development. These are areas Deloitte described as important proving grounds for leadership.
The next generation also expects to shape the future direction of family enterprises, with respondents identifying technology modernization, artificial intelligence, new products and services, geographic expansion and sustainability initiatives among their highest priorities.
To prepare future leaders, businesses are increasingly emphasizing practical experience over informal mentoring. Forty-four percent require next-generation family members to hold formal roles with performance accountability, 43% rely on leadership shadowing or on-the-job training, and 40% expect family members to gain outside work experience before joining the business.
For many business-owning families, succession extends beyond choosing the next CEO. Preparing future leaders, establishing governance and starting transition conversations early may all play an important role in preserving both the business and the family’s long-term financial legacy.
