Passing a family business to the next generation is one of the hardest things an owner will ever do. Founders often delay because the topic touches control, family relationships and their own mortality. Advisors who can open that door gently are positioned for some of the most meaningful, and largest, cases they’ll ever write.
Key takeaways
- Research on family businesses has long found that fewer than one-third survive into the second generation and only about 13% reach the third.
- Succession worries show up in the next generation too: children wonder when the founder will retire and whether they’ll ever own stock.
- Insurance funds much of the plan, including buy-sell agreements, estate liquidity and equalization among heirs.
As family business advisors like to say, family businesses have only three problems: succession, succession and succession.
Why succession is the biggest threat to family firms
Competition, regulation and taxes all matter, but poor succession planning is widely considered the greatest threat to a family business’s survival. Many founders approach retirement with no plan, or with a plan that won’t produce the results they want. Family business research, including work by Craig Aronoff and colleagues, has found that fewer than one-third of family businesses make it to the second generation and only about 13% to the third.
What the next generation is thinking
Owners aren’t the only ones worried. Children and other family members in the business often raise concerns like these:
- “I don’t think Dad is ever going to retire. What future does that leave me?”
- “I’m not sure I’ll ever own stock in the business. Why should I stay?”
- “How am I going to work with my siblings once the founder is gone?”
Surfacing these questions, respectfully, can motivate an owner who has been putting the conversation off.
How to open the conversation
- Start with the owner’s goals, not products: when do they want to step back, and what does success look like for the family?
- Ask about “what if” scenarios: death, disability or an unexpected offer to buy the company.
- Bring in the team: attorney, CPA and valuation professional, with you coordinating the insurance pieces.
- Use a fact finder so the owner sees the plan is built on their own information.
Where insurance fits
Once goals are clear, insurance often funds the plan: buy-sell agreements between family owners, key person coverage while successors develop, and estate liquidity so heirs don’t have to sell the business to pay estate taxes. See our articles on succession planning for family-owned businesses and estate tax liquidity.
Our Advanced Markets team can help you prepare for the first meeting and design the insurance strategy. Contact us to set up a consultation.
Frequently asked questions
What percentage of family businesses survive to the next generation?
Long-cited family business research puts it at fewer than one-third surviving into the second generation and about 13% into the third.
Why do business owners avoid succession planning?
It involves giving up control, making decisions among family members and confronting mortality. Many owners are also simply focused on day-to-day operations.
How does life insurance support a family business succession plan?
It can fund buy-sell agreements, protect against loss of a key person, provide estate tax liquidity and equalize inheritances between heirs who are and aren’t active in the business.
Reviewed by Tim Fuller on 2026-09-26
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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