As an entrepreneur, you started your business out of genius, passion, and inspiration. Before you know it, a small business has developed into a thriving company – with employees coming to work every day to make a living for their family. Business growth and maturity follows.

Your dream is that your children will take over this carefully nurtured pride of yours when you get to old. You can retire happily knowing that your kids are taken care of, and so is your business.

However, only 30 percent of all family-owned businesses survive into the second generation and only 12 percent will make it into the third generation. Surprisingly, only 3 percent of all family businesses operate at the fourth generation and beyond.

Many of the next generation businesses owners fail to capitalise on the efforts of their ancestors. The second-generation business owners are also not as inspired or passionate as the founder was, and they view the family business as a means to an end.

The Top Characteristics of Second Generation Business Owners That Lead to Failure

While we are by no means undermining your children, being aware of the common traits that lead to second generation business failure gives you the opportunity to manage that risk. G2 isn’t doomed, but they do have to work harder to find the love and care that was given to the business by the founder.

1. Entitlement

When a company is handed to a one on a silver platter - often with no investment and straight into a senior management role – a risky sense of entitlement creeps in.

2. Laziness

Entitlement more often than not equates to laziness.  While these are not symbiotic character traits, they are often found together. 

Maybe the heir is not lazy, but just not motivated to work hard on this business. We have all come across G2 business owners who play golf and vacation like it is nobody’s business. 

3. Indifference

Because their role as business owner has come about by bloodline rather than passion, many second generations do not give as much of a shit as the founders did. If you don’t have at least a fraction of the passion of the founder, it will be hard to convince your customers, employees, and other stakeholders to stick around.

4. Resources

Strategy execution is pretty much entirely dependent on the resources to carry on.  Many a founder takes a lot of the equity out of the business when they leave. Running on cash flow and goodwill is fine in a boom economy, but not in tougher economic times.

5. Knowledge

Even if your children spent a ton of time with you at work, it is quite a different story to actually run a business as opposed to observing it be run. Getting to “learn as much as you can about this” is too vague.

6. Network

As the founder of the business, you know all the customers, the employees, the businesses in the industry.  Starting out, you made connections at every turn because you just never knew where new business may come from.  For the new owner, the importance of maintaining and growing that network is essential.

7. Employee Mentality

Beware the new owner who comes in thinking of the business as a pay check and lacking an “Owner” mentality.  During lean times the new owners need to flex.  When the business seeks to expand, perhaps the top dog should go without for a while until the risk pays off.  If that isn’t in the cards for G2, then neither is long term success for G1’s hard work.

8. Selfish

Having started in the business at an established phase of its lifecycle, many incoming owners forget that a business is fluid. As the business ebbs and flows, so their lifestyle needs to. Not adapting their lifestyle accordingly often leads to G2 business failure.


 For more information about business coaching and business consulting services, contact me:

083 256-0378   |   This email address is being protected from spambots. You need JavaScript enabled to view it. 

Thanks for reading.  Please feel free to like, comment, share, tweet, retweet, pin, quote, email etc.