But, can you turn that success into generational wealth? Get it right, and your legacy can be a positive force for your family and the community well beyond your own lifetime. However, generational wealth is not easy to achieve – it takes planning, cooperation and the ability for multiple generations to establish common goals.
Is it time to take a step back from your business?
Do you have a solid plan for stepping back from your business? Half of small business owners in New Zealand are over 50 years old, well above the Asia-Pacific average of 28%, according to a 2024 survey. We’ve seen this among our clients, with business owners staying involved with their companies into their late sixties, seventies, and even their eighties.
Why don’t they step away earlier? Some love their work and their business or just don’t want to stop working. Some see themselves as invincible and believe they’ll stay healthy forever. In our experience most simply don’t have a succession plan because they are just too busy working in their business, or they haven’t turned their minds to what happens when they are no longer around.
Unfortunately, hanging on for too long can put a handbrake on growth. The survey found older business owners were much more likely to report that their companies were shrinking. They were also less satisfied with returns than younger owners, and less likely to use digital technologies. The skills of the next generation can build a better business as they take advantage of current and new technologies and innovate differently. They also see the world through a different lens which means they can align their thinking with today’s consumers and employees.
Knowing when the time is right to back away from your business isn’t easy and will depend on many internal and external factors. The only certainty is the time will come eventually, and failing to plan is planning to fail.
Can you pass your business to the next generation?
Your children could be the key to continuing a legacy that builds on your commercial successes and creates new generational wealth. Family-owned businesses are some of the most resilient and long-lasting – think of companies like Sanford and Sons, Barfoot and Thompson, and Pioneer Brand Products. In general, family-owned businesses outperform non-family-owned ones, according to McKinsey research.
Transitioning your business to the next generation might seem challenging, but it can be hugely successful if done well. With a thriving portfolio of businesses and other investments, a family can create income and opportunities for future generations and the wider community – whether they work in the business or not.
Finding common ground between the generations
Entrusting the family’s wealth to your children requires open conversations, investment in building a close family, and compromise. Different generations have different priorities. For instance, we see the current generation that has built a successful business tending to focus on cashflow and debt reduction, particularly in a volatile economic environment. Whereas, their children may be more forward-looking, focused on how technology can be used differently, sustainability and different ways to engage with the community. Some of the conversations are going to be challenging or even frustrating. Not having those conversations will not reduce the challenges. But having them in a structured way that starts by focussing on the legacy and values that bind the family together, can build something incredible.
Take for example, the owner of an e-commerce site that sells products direct to consumers. It was a steady earner, but her son and daughter didn’t have much interest in it.
But, when the owner and her two children sat down together and talked about what the business could achieve, how it could grow, and what it could potentially return to the family, they generated ideas the current owner could not have worked through on her own. All three family members became very excited about the future of the business. The owner’s daughter wanted to introduce new products, all in sustainable packaging, and the son wanted to overhaul the site’s UX. Both ideas had previously been dismissed by the owner as they were too difficult to implement, but with the kids on board it felt achievable. When everyone puts in some work in scenarios like this, a business can grow successfully making it easier for owners to let go of the reigns and exit day-to-day operations.
Not everyone’s kids want to run the business
Sometimes the next generation doesn’t want to run a business, and that’s okay too. Your wealth isn’t only about your business. A succession plan that is put together after a business is sold is equally important and can create a healthy generational legacy.
For example, you might be running a long-established business that’s making a reasonable profit. Your role in the company could be working with customers while your partner manages the day-to-day accounts. Your children aren’t interested in any part of the business – they have their own careers and families. But your key manager (or another party identified during your succession planning process) is keen to buy the business and has secured funding to buy you out over three years while you and your partner step away. You’ve now set yourself up for a wonderful retirement and the ability to provide for your children and grandchildren – particularly if you have set up other investments along the way.
Generational wealth can last for centuries
It’s often said that wealth is lost after three generations, and you can find plenty of examples where that’s true. A lack of planning and financial education means wealth can be frittered away quite easily.
But equally, a well-managed and intelligently invested portfolio can set up your children, and their children, for a brighter future - funds for education, first homes, and start-up businesses of their own. Serious wealth can even last for centuries – one paper found wealth among wealthy Italians in the 1400s was still having a positive impact on their descendants in 2011, six centuries later.
You don’t have to be among the superrich to start building generational wealth. Some degree of planning will also be invaluable for any family with a net worth over several million dollars, or families with aspirations to reach that level of financial security. A good way to start is for you and your family to agree what your aspirations and goals are, how you can best work together as a team and what needs to be done to prepare the next generation to build on your legacy. And these conversations need to start sooner rather than later so each phase of the journey is smooth, with no surprises or rushed decisions due to a lack of planning.
Working with your family across generations can be a hugely rewarding experience, giving parents and kids more certainty and confidence. It can create common ground, improve relationships and start the family on the road to generational wealth.
If you’ve been successful in life, why not do what you can to make that legacy last and use the wealth you have created to build a lasting cohesive family?
