Financial Management

Successful Succession in a Family-Run Business Requires Planning for Construction Industry Owners


By their very nature, family businesses in the construction industry can thrive on the strength of relationships that run deeper than those between unrelated co-workers. Accordingly, family-run construction businesses present challenges specific to their structure and ownership. Only 30% of family-owned businesses survive into the second generation, and a mere 12% carry into the third, according to the Family Business Alliance. This indicates that many of these businesses may not have the proper guidance to assist with generational planning.

To ensure your construction business remains a thriving enterprise for a next generation, serving multiple generations of your family, here are some tips to bear in mind.

1 – Let Employment in the Family Construction Venture be Voluntary

Letting members of the next generations decide for themselves whether they want to work in the family construction enterprise helps the passing-down of leadership roles be more organic and is a good way to ensure the business’ longevity. In fact, those who want to dedicate themselves to the family construction business might even benefit from working at other organizations in the construction industry for a time and bringing that perspective and knowledge back to the family entity.

2- Bring in Outside Expertise as Needed

Running any construction business requires multiple skill sets—everything from marketing and sales to accounting and technology management. To cover this wide range of skills, consider hiring talent from outside the family to fill in any gaps in training or experience. Come up with a fair compensation plan for these individuals that will engender loyalty to the company even if they are not family members.

3- Build Relationships

Not only do you have to build things, but you must also build significant bonds based on mutual respect with subcontractors, clients and employees. Forming a strong understanding of your best or most highly-skilled workers is essential, enabling you to come up with incentives and strategies to keep them motivated and deeply engaged in the business setting. These dedicated employees can become invaluable key individuals who may even hold high-ranking positions, fostering a harmonious integration of both talent and familial ties within the company. Promotions and compensation should be based on merit and should not be assumed based on being a family member.

4- Manage with Flexibility and Accountability.

While a family-run construction operation inherently provides a more familiar work environment, accountability will keep the business running smoothly and ensure that everyone is treated with respect. Having clear roles and responsibilities for each family member, defining the expectations for each role, and having consequences when those expectations are not met can keep everyone on the same page.

5- Embrace Change

Families often thrive when traditions are honored and passed on, but it is important to remember the importance of innovation in the construction industry. In any business, it is essential to embrace change. That commitment could translate into regularly attending construction industry conferences and tracking trade insights to stay on top of emerging trends. It may also require that the family members who cover different roles in the company regularly pursue additional education and training that will keep them current with the ways their disciplines evolve. On a company-wide scale, it may also require having the willingness to shift the core function of the construction business if the demand for once-mainstay construction projects and services wanes and new areas of opportunity emerge.

6- Consider Setting Boundaries Between Work and Family Life

Running a family construction business can often feel like a 24/7/365 endeavor. As a consequence, burnout can be a problem. To avoid that, it is necessary to create some separation between family life and work life. For example, consider avoiding having work-related discussions during family time at home, during vacations or at family get-togethers. Another idea is to appoint back-ups in the construction business who can be on call when each family member needs to take breaks from overseeing the business operations. No one person should be assumed to be indispensable. Having adequate back-up is essential.

7- Develop and Communicate the Succession Plan Well Ahead of a Transition

Having open communications about the future of the construction business and planning for its transfer well in advance of the time it will occur can reduce stress and foster an orderly transition in the ownership. A child or grandchild may elect to pursue a different career path, so regular discussions about future commitments will make passing the baton easier and more organic. Identify as early as possible those individuals who have the skills and desire to assume the next generation ownership. These individuals may even be non-family members if they represent the best chance for the company to succeed into the next generation.

Finding the Best of Both Worlds

To capitalize on a family’s unique connection and commitment to each other, family construction businesses may still need to adopt some of the rules that enable other types of organizations in the construction industry to flourish. It’s a fine balance because too many rules and requirements can inhibit creative thinking and cause tension. Still, operating with clear guidelines that strengthen team spirit, mutual accountability and the shared vision for the company can help a family-run operation remain successful for many generations.

About the author: Phillip Ross, CPA, CGMA is an Accounting and Audit Partner and Chair of the Construction Industry Group at Anchin, Block & Anchin, LLP. For more construction industry thought leadership and content, log on to

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