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Family Business: the Next Family Business: the Next GenerationGeneration

David Zaudtke

Doug Ammerman

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What is a family business? Do you have any idea about what is

involved in owning a family business? (open)

Can you describe what qualities and abilities a good family business owner should possess? (open)

What is wealth transfer? Suppose you were the owner of a family

business and you were getting old, how would you pass your business onto your children?

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A family business is a company owned by a family and is handed down from one generation to another.

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The hand-over of a family business from one generation to another is called wealth transfer.

Further question: what are the difficulties involved in wealth transfer?

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Family business first occurred in the 17th century.

There are many family businesses in the world. Take USA for example, they hold more than 90% in American economy. Among the top 500 companies listed by Fortune, more than 1/3 are family businesses. Some renowned companies such as Motorola, Dupont, Panasonic, etc are controlled by family businesses.


Most companies of all types and sizes fail within 20 years of their birth. Even among family companies—a much hardier breed—less than 30% survive into the second generation, barely 10% make it to the third, and only about 4% to the fourth.

Some successful examples in USA:


102 companies that have remained owned and operated by the same family at least since 1865, and in some cases back as far as the early 17th century. All have operated for at least five generations, some for eight or nine or, in one case, 14 generations.

The oldest family business:

Zildjian Cymbal Co. (1623)

More info: http://www.familybusinessmagazine.com


According to statistics, the average survival time for family businesses is 24 years. Now many family businesses have survived the capital accumulation stage and enter a stable development stage. However, many enterprise founders have to retire because of age, which is a critical problem to the family businesses.

The purpose of this article is to solve this problem.

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private enterprise state-owned enterprise; state-

enterprise chairman of the board; manager a comprehensive succession

plan; the succession management: the succession process; the succession-management

structure; the final succession

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What is the main problem to the failure of many family businesses?

Many of them have no proper planning. If they have plans, they can not start planning at proper time. They usually start too late.

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What is the authors’ reason that it is necessary to start planning for wealth transfer as early as possible?

The reason is that it usually takes at least 10 years to form a properly-structured comprehensive succession plan including sophisticated estate management strategies.So the earlier, the better.

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The viability of many of these transfers is questionable.

It is doubtful whether many of these transfers can be successfully realized.

Survival of a family business into the third generation is a rare occurrence.

It is not common that a family business can survive long enough to be transferred to the third generation.

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The sad part is that many of them could survive with proper planning.

It is sad that many businesses that will fail could succeed if their owners had planned the succession of their family businesses properly and comprehensively.

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Indeed, a comprehensive succession plan, which includes sophisticated estate planning strategies, generally requires at least a 10-year horizon to be properly structured.

Actually business owners need to form an overall 10-year future plan for succession, which includes complex and careful planning strategies.

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Paragraph 4 What suggestions do the authors give for a successful transfer of a family business? Four essential elements: 1. Plan a succession management 2. define family employment

practices 3. Establish and maintain family

harmony 4. Plan the estate

This is a transitional paragraph.

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Paraphrase But regardless of how diverse

they are, four key elements must be in place before a business can be successfully passed from one generation to another.

But no matter how different they are, four key elements must be established before a business can be successfully passed from one generation to another.

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Why should there be more than one person to replace a family business owner/founder?

Because family business owners/founders are usually highly motivated, energetic, and usually good at more than one skill in managing a business (production experts, marketing geniuses, skilled financiers)

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What does the authors suggest family business owners to do in order to make the business function well?.

Organizational charts In what way can organizational chart

help a family business owner?

Organizational charts indicate the differences in management structure and draw attention to(highlight) misunderstandings and differences in judgment, thus helping the owners to plan and form the best management team possible.

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What is the authors’ purpose of citing Judy’s case? (para. 6)

To introduce a kind of succession management structure that family business owners can consider giving ownership to their children while having strong management teams run the business.

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Why is it suggested that family business owners retain loyal employees? (para 8)

Loyal employees usually hold key positions in management and play an important part in the development of the business.

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Why did the author use the word “seasoned” instead of experienced? (Para 9)To stress the point that only when the children have undergone proper training in business management for a long time and know the problems involved and they become experienced enough , can they take over the management of the family business.

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Please summarize what a family business manager should do in planning his / her succession management. (para 5-9)

create organizational charts develop an action plan retain loyal employees form a transitional management

team if the would-be successor is not ready to take over when the present manager retires

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Paraphrase In order to allow for an orderly

transition of responsibilities (para 7)

in order to take into consideration the transfer of responsibilities/succession to proceed systematically and smoothly

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Key managers must have a clear picture of where they stand and what their responsibilities will be in a succession-management structure. (para 8)

The key administrative personnel must know exactly what positions they have and what duties they will perform.

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What does the example in para.11 imply?

Everything should be made on the needs of the business rather than on the needs of the children.

What kind of example is it? It is a negative example.It tells

us if things are not made on the needs of the business, it will have a lot of troubles.


What’s the purpose of para.12? According to the needs of the

business, the authors suggest one way to deal with their legacy and control of a company if the children are not suited to take over the business.

What ‘s the main idea of para.13? If a child is determined to carry on

the business, ensure that he or she will receive the right education and business experience.


How to ensure he or she receive the right education and business experience?

1. Outside job experience 2. Working his or her way up

from the bottom at the family business


Parents can pass on their legacy to their children without necessarily giving them control of a company. (para 12)

Parents can leave their property to their children but not the management of the company.


Proving themselves outside the family business also gives children greater credibility with employees when they do eventually take control of the family business. (para 14)

If the children show that they are

capable outside the family business, they will surely gain greater confidence of the employees.


Establish and Maintain Family Harmony (para 16-18)

Comprehension Paraphrase Language Points


Topic of each paragraph

(16) consider seating an outside board of directors

(17) develop a family vision document and use family council meeting

(18) communicate often between companies and families


How to establish and maintain family harmony?

Three suggestions: seating an outside board of

directors developing a family business

vision document and holding family council meetings

communicating often between companies and families


Rivalries and jealousies can be extremely time-consuming, not to mention destructive. (para 16)

Rivalries and jealousies can waste a great deal of time; moreover, they can cause bad feelings.

---the reason for why the business should establish and maintain family harmony


A family vision document (para 17)

A formal written statement which provides visions, embodying purposes, values, goals and operation procedures for the family business


not to mention (para.16): as well as (emphasizing sth.)

He is one of the most intelligent, not to mention handsome people I know.

We were served French champagne, not to mention the usual cocktails.

7. seat+sb.(para.16): give sb. a place to sit; give sb. a position

The new concert hall seats(has enough seats for) 1500 people.


Plan your Estate (para 19-22) The topic of each paragraph:

• 19. The importance of estate;• 20. Suggestion: life insurance, the

effective way to cover estate taxes;• 21. Example (negative): a grocery

store;• 22. Finding ways to reduce or

manage the transfer taxes as soon as possible


What is a family business manager suggested to do in planning his / her estate?

Utilize planning techniques to minimize estate-tax costs e.g. buy life insurance. What do the authors think of life

insurance in solving the problem of estate taxes?

They think that life insurance may be effective in most cases, but it can also be an impractical solution.


What can we learn from the the case of grocery store?

Poor estate planning can result in the destruction of family businesses. ( good estate planning can lead to the success of family business).


Conclusion of the passage

For most family businesses, it is absolutely necessary to start dealing with all the problems in a comprehensive manner right away.

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Translation 1. He is an experienced banker

and an acknowledged trade expert, not to mention an excellent managing director.

2. Regardless of danger, volunteers from an Italian organization for peace have gone to Baghdad, the capital of Iraq, to form a “body shield” for the purpose of preventing the U.S. from bombing the place.

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3. Nobody in the family is more dedicated to operating the real estate business than Judy.

4. Because of the economic depression, real estate agents are in the dilemma of whether to lower prices or let sales fall off.

5. More often than not, Mr. Smith earns great profits by careful investment of his capital.

6. John did not make much of a mark in his studies at school, but he excelled at sports.

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7. Orderly transition of responsibilities is a condition for the long-range prosperity of a family business.

8. You had better have have a clear picture of prospects before formulating a plan for investment.

9. Although sculpture is a time-consuming art, there are still some people following it as a profession.

10. The software company is in the midst of being transformed from an individual proprietorship to a joint venture.

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Summarize the whole passage and write an article about wealth transfer of family businesses. State your own idea.

The The

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