For many potential successors from family businesses, entrepreneurship is attractive, but their parents' family business feels less and less like the obvious starting point. Whereas earlier generations almost automatically entered the business at home at the kitchen table, new generations are increasingly choosing their own route.
And remarkably enough, this is happening more and more often with the support of those same parents.
Figures show that this is no incident. Although a large majority of Dutch businesses are family businesses, in recent research only about 10% of children indicate that they actually want to take over their parents' business. This does not mean that they reject entrepreneurship. On the contrary: more and more young professionals do want to do business, but in a way that better suits their own talents, values and stage of life.
Those figures reflect a broader trend: young adults have many more career choices and opportunities than earlier generations, and often value other things, rather than continuing a family legacy. Moreover, many family businesses were created in a different time, with different markets, technologies and work cultures. For young people, the step to enter them sometimes feels more like taking over a legacy than building something of their own.
New role for parents
An interesting, and perhaps contradictory, phenomenon in this shift is that parents still want to play a strong role in their children's economic future, but no longer through the family business. Increasingly, parents are financially supporting their children in buying another business. We see this trend very strongly in our daily practice at BuyInside.
This trend stems from two realities:
- Children do not necessarily want to run their parents' business that they have grown up with all their lives, but they do want to be entrepreneurs in an environment that better suits their own talents and ambitions.
- Parents often sit on a lifetime of accumulated wealth and look for ways to distribute it without causing family conflict while maintaining support for the succeeding generation.
The result is a hybrid model: parents help finance an outside acquisition plan, which still allows the children to acquire and run a business without the emotional and professional ballast of a traditional family business acquisition.
Trend contributes positively to succession issues
You might think that this decline in internal (family) succession exacerbates what was already a well-known problem in small and medium-sized enterprises (SMEs): the succession crisis. But this development actually also offers important opportunities for the continuity of SME businesses:
- Fewer emotional barriers and conflicts
In internal succession, business and family relationships often intertwine, which can intensify conflicts. When children choose another business, the entrepreneur-successor starts with a professional relationship and a fresh start. - Greater mobility in entrepreneurship
Helping children with another takeover or own business creates a dynamic (takeover) landscape with new players and innovations, a healthy stimulus for SMEs. - Good match between talent and business
Not every next generation has the skills or ambitions to lead the family business. By looking at outside opportunities, children can do business with a business that better fits their profile and find the right successor for their own family business. - Alleviating the succession crisis
By shifting the focus from rigid internal succession to broader forms of entrepreneurship, many (family) businesses can ensure their continuity while providing new entrepreneurial blood to SMEs.
Conclusion
So the classic dream of father to son (or daughter) is changing, but that need not be a disaster at all for the continuity of the family business. Indeed, allowing the new generations to choose their own entrepreneurial path, supported by the resources and experience of their parents, creates a new form of succession, both outside and within the family business.
Moreover, there are plenty of qualified buy-in managers ready to successfully fill the vacant entrepreneurial positions in these family businesses!
