How to Protect a Family Business

She's now in charge of day-to-day operations at Velvet's headquarters in a picturesque old mill, which is outfitted with a manufacturing plant, ice cream parlor, gift shop and museum and welcomes about 150,000 visitors a year. She took over from her father, Joe Dager, who became chairman of the board.

A proper succession plan made for a smooth transition. "It was well thought out and everyone in the family understood each other's roles," says Luconda, 41, the oldest of four sisters, three of whom work in a business that employs more than 100 people.

Devising a succession plan may take years of negotiating and fine-tuning and airing of issues that family members might just as soon ignore. But it's worth it. In the end, a viable plan will boost survival odds for the enterprise that is often the family's prime source of livelihood and pride.

A good succession plan lays out clearly the firm's future ownership and leadership, along with practical and legal steps for getting there. A plan should also detail how information will be disseminated to family members and employees during the transition.

"A decade is a good horizon, so that no one expects everyone to change their ways of doing things overnight," says Nancy Drozdow, principal of the Center for Applied Research, a Philadelphia-based management consulting firm. "There is an expectation of learning, making mistakes, regrouping."

Twenty-seven percent of respondents to a PricewaterhouseCoopers survey of family businesses in 15 global industry sectors foresee a change of hands within five years, and 53 percent of those companies expect to stay family-owned. But 48 percent of companies don't have a succession plan, and of the ones that do, only half have chosen their future chief. Released in November, the survey tapped more than 1,600 family proprietors and managers in 35 countries.

For many family business owners, the major issue is, "Do they transfer now or do they wait until they die?" says Tom Zanecchia, a wealth management consultant in Denver. "Generally, we do all this while the owner — the older generation — is still alive, so there are no surprises later."