Most businesses worldwide are family owned. In the coming years, millions will face ownership and leadership transitions. History shows that preparation for this process is often insufficient, and that the costs of poorly managed succession are significant.
Family businesses account for roughly two-thirds of all companies globally and generate a similar share of global GDP (Family Firm Institute, 2017). While most are small and medium-sized enterprises, the universe also includes some of the world’s largest organizations. Among large listed companies, family-controlled firms (defined by The Economist as those in which a family holds at least 20% of shares or voting rights and which have already undergone at least one generational transition) represent nearly a quarter globally, ranging from one in sixteen in the United States, to one in seven in Europe, and one in three in Asia (The Economist, 2026).
This business fabric is now facing an unprecedented generational shift. In the West, the baby boomer generation is reaching retirement age. In China, where the private sector began to develop in the 1980s, and across the rest of Asia where independence movements stimulated earlier waves of entrepreneurship the pattern is repeating (The Economist, 2026). The numbers help contextualize the scale of the phenomenon. According to a McKinsey report from February 2026, around six million small and medium-sized enterprises in the United States alone will face ownership transitions by 2035, as founders retire. More than one million of these companies are viable candidates for sale, representing up to USD 5 trillion in enterprise value and employing more than 60 million workers (McKinsey, 2026). Well-managed transitions could preserve up to 12 million jobs and protect around USD 250 billion in annual local purchasing power. However, preparedness for this transition remains generally insufficient. According to Deloitte data, only 57% of privately held family businesses in the United States have a succession plan in place. The absence of planning can lead to severe consequences, such as prolonged legal disputes among heirs, as seen in the South Korean LG Group following the death of its chairman (who left no will) in 2018, or leadership vacuums in companies without natural successors, as occurred with the Armani house.
Academic research reinforces the economic relevance of the issue. Fernández-Aráoz, Nagel and Green (2021), in a study published in the Harvard Business Review, estimate that the market value destroyed by poorly managed CEO transitions in S&P 1500 companies amounts to nearly USD 1 trillion per year. The authors conclude that only 39% of externally hired CEOs outperform internally promoted ones, and that more structured succession planning could add one percentage point to annual projected returns in the US equity market (equivalent to 20%–25% higher returns).
However, the impact is not limited to large listed companies. When a small family business closes due to the absence of a successor, jobs disappear, local value chains weaken, and opportunities for economic mobility decline, particularly in rural areas (McKinsey, 2026).
Succession is, by nature, a process rather than an isolated event. It requires early preparation, intergenerational dialogue, and the ability to distinguish between family interests and business interests. Succession in family businesses is not merely a management decision, but a process shaped by values, expectations and relational dynamics which, when not explicitly managed, can undermine both family cohesion and business continuity (Handler, 1994). Planning for continuity is ultimately a responsibility that begins long before it becomes urgent.
Liliana Dinis, Professor at Católica-Lisbon SBE