The Challenges of Managing a Family Forest Business in Transition

The author of this article, Andy Stone, is the Director of Family Business Services at Forest Resource Consultants. He has over 35 years of experience serving as an executive with multi-generational family-owned businesses.

The Challenges of Managing Family Forest Business in Transition

Historically, most entrepreneurs have acquired their initial timberland property for recreational purposes or from an inheritance.  Over time, additional property is acquired, and their ownership slowly grows into a significant part of their overall investment portfolio.  As time passes, the ownership develops into a sizable family forest business often met with challenges that develop during transition from the 1st generation to the 2nd generation and on to future generations.

Recent studies show that family businesses in transition have a 30% probability of successful transfer to the 2nd generation, a 10 to 15% probability of successful transfer to the 3rd generation, and less than a 5% probability of successful transfer to the 4th generation.  When viewing this in terms of family governance and decisions, the first generation often has only one decision maker whereas each successive generation has a multiple of owners with different management philosophies, goals, and financial needs.

Thus, a successful transition requires developing a plan between the present and future generation of owners that establishes a common vision for the business as well as a mission statement to guide future decisions.  Furthermore, a successful transition doesn’t stop with the development of a vision and mission.  Instead, there should be ongoing and consistent communication and transparency around business operations.  This is the key to building trust and confidence between family shareholders and the businesses governing body.

Whether developing an operation plan for a newly-formed family business, reviewing operations of an existing family business, or developing a transition plan for the next generation, our staff has a combined experience of over 150 years that can help you evaluate critical decisions and ensure your family’s legacy remains strong.

Contact us to set up a free consultation.

Let’s discuss how we can assist in building a plan the fits the vision and mission of your family business that helps you avoid transitional pitfalls.

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