Every family business owner dreams of being like Chick-fil-A. Not necessarily of reaching $18.8 billion in revenue (that’s a lot of chicken!) but of building an economic engine that serves their family across generations.

S. Truett Cathy founded his original diner in 1946, then founded the Chick-fil-A we all know and love today in 1961. Despite the company’s meteoric rise, the Cathy family had maintained control of the company across three generations. Truett’s son Dan Cathy serves as Chairman of the company, and his grandson Andrew Cathy was named CEO in 2021.

How to Transfer a Family Business to the Next Generation

Happy family running a business together, planning buyout

For many business owners, the journey of passing the baton to the next generation defines their legacy.

Maintaining a family business across generations isn’t an easy task. Many current owners, especially Baby Boomers nearing retirement age, haven’t made exit and succession planning a priority. According to the Exit Planning Institute’s 2023 National State of Owner Readiness report, only 14% of owners in the Baby Boomer generation consider developing an exit strategy their top priority, with only 33% having given exit planning a high level of attention. 78% of owners nearing retirement say they haven’t had time to take this vital work on.

Sofer Advisors’ message to every business owner, whether they are Boomers or younger, is simple—you need to make time for family business succession planning, and the earlier the better.

Before you ask how to transfer business ownership to a family member, you should begin by making sure that is the right path for your family and your legacy. Frequently, selling the family business ends up being the right path forward to take. The Exit Planning Institute recommends in their readiness report that owners begin family business succession planning by aligning their personal interests, financial interests, and business interests. This is best accomplished through introspective questions.

Answering questions like “Who am I within the business?”, and “who am I outside of the business?” are key to starting this journey. Additionally, it’s critical that business owners determine just how important it is that the next generation carries on the family tradition. It could be the idea of the next generation taking over is not that important—more of a cultural norm, like hoping your son or

Senior passing tablet to junior in family business discussion

A father passes his trade to his second-generation daughter, infusing the family business with a legacy of trust and tradition.

daughter attends your alma mater for their college education. In other cases, it truly is a priority, and this should guide your business succession planning.

Once again, planning early is a key differentiator between success and failure. The Family Firm Institute (FFI) recently published the results of a survey in its Practitioner journal that show the impact of having a successor in place on innovation. The survey found that when a next generation successor is in place, companies spent 20.6% more on innovation to hand over the company on its best footing. That jumps to an astonishing 57.3% increase in innovation when the designated successor is involved in the business from childhood, as members of the Cathy family were involved in Chick-fil-A from its early days.

Regardless of your age and how long you plan to stay active within your business, it’s time to begin planning for the future today. The process may begin with introspection, but it quickly reaches a point where you need outside help—and that’s where Sofer Advisors swings into action.

Family Business Buyout Strategies

A core component of your succession planning should be an accurate and thorough business valuation completed by our team of credentialed experts. An effective valuation furthers many objectives at the same time. For example, it provides clarity on how realistic your exit goals are. If you plan to leave the business within 10 years and would like to do so at a certain valuation, it’s important to understand where you are today to determine how feasible those plans are.

Family business owners discussing strategies for selling a family business with documents and laptop on table.

Family members gather, meticulously planning the future of their business to ensure a fair and objective valuation

Additionally, a defensible valuation is important if your family business includes other family members who are likely to disagree with your plans for the future. Many businesses include uncles, cousins, and others who might have differing levels of involvement in the business as well as differing levels of financial literacy. If your plans involve buying them out, you must overcome their fanciful (and overinflated) valuations with objective facts.

Once you gain a clear understanding of your company’s value today, you can effectively plan for tomorrow. Sofer Advisors helps many clients create a roadmap to their desired valuation that addresses process improvements and investments that have a direct impact on the value of your business. We also help business owners evaluate their successors so the next generation’s talent can make its own mark on the family legacy.

And let’s be realistic—in many cases, there is no strong successor, or you may be more interested in selling the business to pursue other endeavors. In that case, the roadmap focuses on increasing value and attractiveness to external buyers. When it’s time to move on to your next chapter, your business is perfectly positioned for sale.

To begin your family business succession planning journey, contact Sofer Advisors today for your free consultation to develop the right plan for you and your business before it becomes necessary.

David Hern is the founder and chief executive officer of Sofer Advisors, LLC focusing on business advisory services related to litigation assistance, estate and tax planning, and business enterprise valuations for various privately-held and public companies. He is a qualified financial analyst with a proven ability to simply and clearly communicate analysis to boards of directors, presidents and CEOs, CFOs, controllers and private equity portfolio managers. David has been recognized for enabling organizations to determine their enterprise and equity value for a variety of situations including strategic planning, sale or IPO, mergers and acquisitions, financial reporting (common stock, stock options grants, purchase price allocations, impairment analyses, etc.) and tax compliance (estate & gift, 409A, NUBIG). Industry experience includes, but is not limited to, professional services, business service, healthcare, information technology, financial services, and manufacturing & distribution.