Around 70% of Portuguese companies are family businesses. According to the Portuguese Family Business Association (Associação das Empresas Familiares), they employ around half of the working population and account for around 65% of GDP. At the same time, a study on family businesses by AEP indicates that only about 50% survive into the second generation, and just 20% make it to the third.
Read those numbers carefully. We are talking about the backbone of the economy, and a continuity risk that repeats itself every time the baton is passed. Half of the companies a founder spent decades building never reach the grandchildren.
In my years coaching family businesses, I rarely see succession fail because the children lack talent or because the market has gone. I see it fail for lack of systems. The business works because the founder is there. When the founder leaves, the knowledge leaves too.
Why succession fails
There are three patterns I come across again and again.
The knowledge lives in the founder's head
Prices, special terms for long standing customers, how to negotiate with a particular supplier, the rules for accepting an order. None of it is written down. It has worked for 30 years because the same person always decides. The second generation inherits the company, but not the manual, because the manual never existed.
Family and business get mixed up
Business arguments over Sunday lunch, roles handed out by kinship rather than competence, salaries that bear no relation to the job. When family and business have no clear boundaries, every business decision becomes a family conflict, and the other way round.
Succession is treated as an event, not a process
Many families talk about succession as if it were a single day: the day Dad retires. In reality, a well managed transition takes years. It means preparing the successor, handing over responsibilities gradually and testing whether the company runs without the founder there every day.
A business that works without you
At ActionCOACH, we define a business as a commercial, profitable enterprise that works without you. That definition is particularly demanding in a family company, because it forces the founder to ask an uncomfortable question: if I am away for a month, does the company keep selling, delivering and getting paid?
If the answer is no, the problem is not succession. The problem is that there is not yet a company ready to be handed on. There is a founder with a structure around them.
The good news is that this can be fixed with method. The same systems that make succession possible also make the company more profitable today, because they reduce dependence on one person and free the founder to think about strategy.
A succession readiness checklist
This is the list I usually work through with business families. It does not all need to be finished this year, but every item should have an owner and a date:
- Decision map: list the 20 decisions the founder makes most often and identify which ones could move to someone else straight away.
- Written processes: document, in order of impact, the processes for sales, purchasing, production and collections.
- The real organisation chart: draw who actually does what today, not the ideal version. Then draw the one for five years from now.
- Entry criteria: agree what training and experience a family member needs before taking on each role.
- Pay by role: separate what is paid for the work from what is distributed as dividends.
- Shared indicators: a monthly dashboard with turnover, margin, cash and collection periods, reviewed by founder and successor together.
- Family forum: a formal space, separate from management, to discuss ownership and family matters.
Preparing the successor through accountability
A common mistake is preparing the successor only on the technical side: a management course, a few years at another company, and then straight into a senior role. Training helps, but it is no substitute for the experience of being held to account for concrete results.
What works better, in my experience, is giving the successor an area with clear numbers and a 90 day cycle. For example, responsibility for sales, with targets for number of leads, conversion rate and average sale value. Three of those indicators belong to the 5 Ways to grow profit that we use at ActionCOACH. At the end of each cycle, results are reviewed against the same criteria you would apply to any other manager.
This has two advantages. The successor earns legitimacy with the team, because the results are visible. And the founder gains the confidence to let go, because they can see the numbers rather than just the intentions.
The founder's role after the handover
A good succession does not mean the founder disappears. It means the founder changes role. They might chair a board, oversee major investment decisions or look after relationships with the oldest customers. What they should not do is keep making every decision behind the scenes while the successor holds the title on paper only.
Setting out this new role in writing, with clear limits, is often the hardest and most important conversation in the whole process.
Your action for this week
This week, take a sheet of paper and write down ten decisions you made over the last five working days. Next to each one, answer this: could someone from the next generation, or from the team, have made this decision with the right information? If the answer is yes, write down what that information is. You have just started your company's manual.
The AEP figures show that half of family businesses do not reach the second generation. Yours does not have to be one of them. If you would like to approach succession with method, through 1:1 Coaching or a Clarity and Alignment Workshop with the family round the table, the ActionCOACH Porto team would be glad to talk it through with you.