Why is Succession Planning Important for Family Businesses?

Family-owned businesses are a vital part of the American economy. These businesses employ nearly 46% of the U.S. workforce, totaling over 59 million employees.¹  Despite their economic impact and deep community roots, many family businesses face a silent threat: lack of succession planning.

Succession planning is a critical, yet often overlooked element of long-term business sustainability. Recent studies reveal the following:

• Nearly two-thirds of family businesses don’t have a documented succession plan.²
• Only 30% survive into the second generation, 12% into the third, and just 3% make it to the fourth.³
• Around 70% of small businesses listed for sale never find a buyer, often leading to closure.⁴

The cost of doing nothing is steep — not just financially, but emotionally and culturally. Without a clear plan, transitions can lead to:

• Internal family conflict
• Loss of legacy and community trust
• Business disruption or failure

Succession planning isn’t only about naming a successor. It’s about preserving the values, relationships, and stability that make family businesses unique. Whether through preparing the next generation, exploring employee ownership, or planning for a sale, there are options to ensure a smooth transition to the next generation.

Talk to your Federated Insurance^® marketing representative to assist in connecting with an independent attorney who specializes in business succession planning.

1 U.S. Small Business Administration Office of Advocacy. 2024 Small Business Profile. 2024. https://advocacy.sba.gov/wp-content/uploads/2024/11/United_States.pdf. Accessed October 20, 2025.

2 PwC. PwC’s 2023 US Family Business Survey. 2023. https://www.pwc.com/us/en/services/audit-assurance/private-company-services/library/family-business-survey.html. Accessed October 20, 2025.

3 U.S. Small Business Administration Office of Advocacy. Small Business Facts. 2024. https://advocacy.sba.gov/wp-content/uploads/2024/04/Fact-Sheet-Characteristics-of-Family-Owned-Businesses.pdf. Accessed October 20, 2025.

4 Exit Planning Institute. The State of Owner Readiness^TM Research. 2025. https://exit-planning-institute.org/state-of-owner-readiness. Accessed October 20, 2025.

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This article is for general information and risk prevention only and should not be considered an offer of insurance or legal, financial, tax, or other expert advice. The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all losses. The information herein may be subject to, and is not a substitute for, any laws or regulations that may apply. This information is current as of its publication date and is subject to change. Some of the services referenced herein are provided by third parties wholly independent of Federated. Federated provides access to these services with the understanding that neither Federated nor its employees provide legal or other expert advice. All products and services not available in all states. Qualified counsel should be sought with questions specific to your circumstances. All rights reserved.