Closely held businesses are the backbone of the American economy. Despite the attention paid to the stock market, the 8500 public companies traded there provide only 24% of private sector employment; by contrast, 4.6 million closely held companies provide 76% of employment in the private sector. Practically all the job generation in the country is in the closely held sector. What is the most cost effective means of retaining these businesses and the jobs they provide in our communities? Timely and effective succession planning.
In the early 1980s, studies showed that 30% of family businesses made it to the 2nd generation of family ownership and management and 15% made it to the 3rd generation. Twenty years later, a 2004 US Small Business Administration study found that only 15% made it to the 2nd generation and 5% to the 3rd. It gets worse. The small business monitor survey conducted by the Greater Cleveland Growth Association’s Council of Smaller Enterprises (COSE) found, for example, that only 21% of Cleveland family business owners have written a plan for succession.
The consequence of the absence of succession planning is that too frequently businesses are sold to competitors who may consolidate operations, reducing local employment, or may simply shut the doors and liquidate. The failure to plan for business succession in small and middle-sized closely held businesses is the leading preventable cause of job loss in the U.S.
The Succession Planning Program at Kent State University is designed to provide business owners with the information they need to get started with their business transition; and to provide Economic Development Professionals with the information and resources to help them retain businesses and jobs in their communities.