Research shows that only 30 percent of family businesses make it to the second generation while only 12 percent make it to the third generation. It is estimated that only 4 percent of businesses make it any further than that. The reason given by many experts is that the solution to problems in a family business are emotional in nature as opposed to practical in nature.
The biggest rift in such an arrangement may come from the difference in philosophies between spenders and savers. Spenders may want to invest more money into the company to increase the odds of making a profit while others may be more conservative and wish to see more money being held back. To reduce the odds of a business going under and relationships being strained or broken due to business conflicts, experts say that it may be worthwhile to create a buy-sell agreement ahead of time.