Family businesses are one of the pillars of the global economy. Companies where a family holds at least 20% of the capital or voting rights account for roughly 70% of global GDP and 60% of employment. The largest of them, with revenue between $5 billion and $100 billion, run operating margins about 1.5 percentage points higher than non-family firms.
Still, holding onto both ownership and commercial success over time is genuinely hard. Historically, only about 30% of family businesses make it successfully to the second generation, and just 12% reach the third. That statistic is the starting point of a new Goldman Sachs report, “Honoring Legacy and Positioning for the Future: A Modern Playbook for Family-Owned Businesses,” which looks at the decisions founders and their families face in turning a successful venture into a lasting institution. The report centers on four connected issues: leadership succession, ownership transfer, growth financing, and long-term management of family wealth.
Plan Succession Before It Becomes Urgent
There’s no single formula for successful succession. Some companies, like Prada, have kept leadership inside the family across generations. Others, including Samsung, Ford, Mars, Walmart, and LVMH, have gradually brought in non-family executives while the family retains long-term ownership and strategic direction.
Every family business, regardless of size or industry, eventually faces the same core question: how to move from a model built around the founder to an organization that can run effectively once that founder steps away. Citing PwC research, Goldman Sachs notes that more than half of U.S. family businesses have some informal succession plan, but only about a third have put it in writing. Without a clear framework, important decisions get made under pressure, and the risk grows that family members’ differing goals turn into business conflicts.
In the first generation, when the founder is typically both top shareholder and CEO, personal and business goals tend to line up closely. With each new generation, though, the number of shareholders grows, personal priorities diverge, and complexity multiplies. That’s why families need a clear leadership philosophy from the outset: whether leadership should be based purely on merit, or whether involving descendants is desirable or even expected, along with clear criteria (age, experience, relevant skills) for a family member to join the business.
When a likely successor isn’t ready yet, the report points to three options: an interim CEO who also mentors the successor, independent board members who offer objective guidance, or having the successor spend three to five years working outside the family firm to build independent experience that can be fairly evaluated. Bringing in outside executives isn’t a retreat by the family, the report argues, but can genuinely strengthen the business, especially as a company’s size and complexity grow beyond what family expertise alone can cover.
Ownership, Economic Rights, and Control Aren’t the Same Thing
Handing over shares is one of the most sensitive calls an outgoing generation makes. Some founders split both economic rights and voting rights equally among heirs. Others separate financial participation from corporate control, so more family members can benefit from the company’s value without all having an equal say in decisions. Some even split off separate businesses or assets entirely.
As the number of shareholders grows, keeping control unified gets harder, so Goldman Sachs stresses the need to codify rules through bylaws, shareholder agreements, and formal governance procedures.
That framework should spell out: rules for transferring ownership and the relationship between economic stakes and voting rights; how control is exercised by the founder, family members, and other key shareholders; the majorities required for major decisions; conditions under which a shareholder can sell or transfer their stake; conflict-resolution mechanisms; the role of independent board members; and the use of holding companies or other structures to consolidate and manage shares.
No plan can cover every scenario, but a solid one limits uncertainty and keeps a family disagreement from turning into a crisis over the company’s control or operations.
Growth Needs Capital, But Also Clear Limits
Financing is another tricky balance: family firms typically want the capital needed to grow without diluting their stake too much or losing control. The current environment makes that harder, given major economic and technological shifts, geopolitical instability, and interest rates that are staying higher for longer.
As a company grows, the goal shifts from simply securing cash to building a capital structure resilient enough to support growth and survive generational change. Careful use of debt can improve capital structure and returns for founding shareholders, as long as it doesn’t put the business at risk. Options include private equity, minority recapitalizations, going public, and strategic sale; traditional banks offer proven financing, while non-bank lenders can offer more flexibility and access to private capital pools.
A private equity partner can speed up expansion into new markets, tech adoption, or operational upgrades, but that has to be weighed against reduced family ownership and its effect on future governance. Any outside capital should fit into a long-term strategy rather than being treated as a one-off deal. The family needs to know upfront what rights it’s giving up, who will make key decisions, and how the deal serves succession or shareholder liquidity.
From Managing Investments to Managing Family Wealth as a Whole
In multi-generational business families, wealth management goes beyond picking investments. It means aligning capital with the family’s values, its governance rules, and the legacy it wants to leave. The mandate should cover four areas: family governance and leadership, wealth structuring and tax awareness, investment management, and philanthropic or social activity.
Families also need a defined investment mandate, balancing liquidity, tolerance for volatility, and capital preservation, and separating who makes investment decisions from who handles oversight and risk control. Distribution policy matters too: without an agreed framework, differing liquidity needs across generations can create friction. The family has to decide whether capital should keep growing indefinitely, fund new ventures, cover living costs and philanthropy, or serve some mix of those goals.
The report also references tools like asset-backed lending, which can meet liquidity needs without disrupting long-term investment strategy, triggering unfavorable tax consequences, or forcing an early sale of illiquid assets. Depending on a family’s size, complexity, and needs, options range from traditional advisor-led wealth management to outsourced family office services, multi-family offices, or a dedicated single-family office, with cost and organizational complexity rising along with autonomy and customization.
The Five Questions That Decide What Comes Next
At the core of the report are five questions that, sooner or later, every family or founder-led business has to answer:
- Who will run the company?
- Who has the right to work in it?
- Who gets access to family capital?
- Who owns it?
- Who controls it?
These can’t be answered in financial terms alone. They require trust, ongoing communication, and repeated re-planning, since the priorities of both the business and individual family members inevitably shift.
Goldman Sachs’ bottom line: business legacy isn’t automatically guaranteed by first-generation success. It needs to be backed by institutions, objective rules, the right capital, and a shared view of the future. For a family business leader, the job is twofold, protecting and growing the company while responsibly managing personal and family legacy. Moving from a founder-centered venture to a resilient, multi-generational structure isn’t a single succession event but an ongoing process of adjustment.
