How Does the Rising Generation Prepare to Inherit a Family Business?

The rising generation prepares to inherit a family business not by waiting for ownership to transfer, but by deliberately developing the human, relational, and operational capital that makes them capable stewards before the title changes. The families who navigate generational transitions well invest in the next generation the same way they invest in the business — with intention, structure, and regular evaluation. The families who struggle most are usually the ones who did the financial planning exceptionally well and did no work at all on preparing the heirs for what they were inheriting.

What does the rising generation actually need to develop?

Roey Diefendorf, a fourth-generation principal of his family enterprise and the co-founder of MTM360, a family dynamics and governance platform, frames family wealth as more than a financial category. There is human capital — the talents and capabilities of family members. There is intellectual capital — what the family knows. There is social capital — the relationships and reputation the family carries. There is spiritual capital — the meaning, values, and purpose that hold the family together. The financial capital is one form among several. When a family invests only in the financial form, the other forms tend to atrophy, and eventually the financial capital follows.

Preparation for the rising generation means investing across all of these forms, not just the financial one.

What specific skills and experiences does the next generation need?

The next generation needs four categories of development before assuming meaningful ownership responsibility.

First, operational credibility. This means working in the business across multiple functions — not just the function they prefer or the one where they are most comfortable. A next-generation member who has only ever worked in sales does not understand the financial structure that makes the business viable. One who has only ever worked in finance does not understand what it takes to build and maintain the client relationships that generate the revenue. Operational credibility requires breadth, and breadth requires discipline.

Second, financial literacy specific to the business. This means understanding the balance sheet, the bonding capacity, the cash cycle, the buy-sell agreement, and how equity is held and valued. It means being able to read the financial statements and understand what they say about the health of the enterprise — not just in general terms, but in the specific context of how this business operates.

Third, governance participation. The rising generation should be participating in family governance conversations long before they have formal ownership authority. This includes understanding how decisions are made, how conflicts are resolved, what the family’s values and legacy commitments are, and what the expectations are for family members who are also employees versus family members who are only owners.

Fourth, external experience. The most consistently well-prepared next-generation members have worked outside the family business — at another company, in a different industry, or in a professional role that required them to succeed on their own merits without the family name behind them. External experience builds confidence, perspective, and the kind of credibility that earns the respect of non-family employees in a way that title alone cannot.

What is the most important conversation the rising generation needs to have?

The 2025 Rising Gen Survey, produced jointly by the Smith Family Business Initiative at Cornell University, Family Enterprise USA, and The Roberts Group, found that the single most-cited concern of the rising generation — across two consecutive years of surveys — was communication, or the lack of it, between generations. The next generation is not, in general, asking for control. They are asking for clarity. They want to know what the plan is, where they fit, what is expected of them, and what they can expect in return.

The most important conversation the rising generation needs to have is a direct one with the incumbent generation about all four of those questions. Not in a formal board meeting. Not in an estate planning session. A real conversation about what ownership means in this family, what the path to responsibility looks like, and what the expectations are on both sides.

What is the founder's role in preparing the next generation?

The founder’s role in next-generation preparation is not primarily to teach technical skills. It is to create the conditions under which the next generation can develop those skills, make real decisions, experience real consequences, and build the confidence that comes from earned credibility.

Anthony DiTucci, president of Livingston Associates and a former family-business operator, frames it this way: the discipline that distinguishes the families who endure is the discipline of moving things from someone’s head into a conversation, from the conversation into a document, and from the document into a practiced cadence. The founder who holds the plan entirely in their own head has not prepared the next generation — regardless of how clear the plan is to them personally.