Why Intergenerational Planning is Vital for Family Business Survival
A 2026 study by Prof. Eyal Kimhi highlights how a lack of intergenerational planning in family businesses harms long-term investments, operational growth, and strategic future decisions.
Family businesses often tend to postpone discussions regarding their transition to the next generation. While the enterprise is thriving, the founder remains active, and the children are still carving out their paths, putting off future planning is a common trap. However, research conducted in Israel points to a troubling reality: the lack of intergenerational transition planning can severely impact business decisions long before the founder actually retires.
A study published in 2026 by Prof. Eyal Kimhi from the Hebrew University, focusing on the continuity of family farms in moshavim, demonstrates a clear link between having a designated successor and investments, business expansion, and overall survival. The research reviews empirical findings showing that farms successfully transferred to the next generation significantly scaled up their operations. In an earlier Israeli study comparing agricultural holdings between 1971 and 1988, farms with a continuing successor more than doubled in size, whereas those without a successor grew by only about 15% on average.
The Importance of Long-Term Planning Horizon
A similar correlation has been observed in the dairy farming sector, where the presence of an intended heir directly correlates with the willingness to invest, expand production, and sustain operations. Why does this happen? One primary explanation is the planning horizon. A business owner approaching retirement age who remains uncertain about who will take the reins may hesitate before making significant investments in equipment, technology, facilities, or new markets.
Conversely, when a continuing successor is clearly established, long-term planning becomes viable. The younger generation can acquire hands-on experience, integrate into decision-making processes, develop new operational domains, and gradually prepare to shoulder full responsibility. Nevertheless, merely naming a successor is not enough. Families must also formalize governance authorities, set a timeline for management transfer, define the founder's status during the transition period, and address the rights of family members who will not be joining the business.
Navigating Fairness Versus Equality
This gives rise to one of the most sensitive issues in family business management: the distinction between equality and fairness. Not every child is suited for or interested in running a family enterprise. Sometimes, one sibling dedicates years to building the business while others pursue distinct career paths. Dividing ownership equally does not guarantee efficient management, and transferring sole control to one child without addressing the others can trigger grievances.
Responsible planning must delicately balance the best interests of the business, the parents' wishes, the capabilities of the next generation, and the rights of all family members. While these studies primarily focused on agricultural moshavim with unique characteristics—meaning not every family business with a designated heir is guaranteed to grow—they provide a crucial baseline for understanding how certainty regarding continuity drives investment decisions.
Intergenerational transfer planning should never begin the day a founder decides to step down. It must start while the enterprise is still active, growing, and fully capable of shaping its own destiny. Ultimately, the core question is not just who will inherit the business tomorrow, but what critical business decisions are being made—or neglected—starting today.
