This article are provided for information purposes only, and are not intended as legal advice.

Why do businesses not always succeed if they are run by a second or third generation?

October 30th, 2008

The best way to describe this is problem is to give an example. This is a very simple one, I will describe a real estate business. There were three brothers in real estate.

They were actively developing properties but they purchased some properties with a very long term horizon for development, some projects can take 25 years before they can be developed, depending on the zoning of the area and the grow of the cities. Due to the time horizon, the three brothers died, they left the property to each of their three kids. Time continued to pass and the second generation died before the property was developed. Each of the three kids had 3 kids. Now there are 27 owners of the business. In one situation, I was aware that there were 90 heirs who owned a real estate property. It is hard to get two people to agree, do you think that it is easy to get 90 to have the same goals. Some needed money, others did not. The ones that needed money wanted to sell the property while others did not. I understand that it took 5 years for everyone to agree to a settlement.

Imagine if you have an active operating business. If the President can make a decision, the buiness hopefully will run smoothly. If you have to vote in a committee to make a decision, too much time may go by before you get a decision and opportunities may be missed.

Filed under: Buy a business — Gary Landa @ 8:47 am

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