Owners of family firms usually see two roads, succession or a sale, and choose between them too late. There are three, because between them sits the separation of ownership from management: the children stay owners while somebody else runs the company. Each route needs different preparation, and each has to start several years before the point at which you want to step back.
Why there are three routes, not two
The question “succession or sale” assumes that ownership and management travel together. In a family firm they almost always have, because the founder was both the owner and the chief executive. There is no reason they have to carry on that way.
Separate the two and three variants appear: the family takes both, the family takes ownership while management goes outside, or the company changes hands. A fourth variant, doing nothing, also exists and is the most common. It ends in a sale under pressure, or in winding the business down.
Route one: succession within the family
It works when the successor wants it, is capable of it and has a mandate. All three at once, not two out of three.
Wants it means their own decision, not agreeing to a parent’s expectation. Capable means experience gained outside the company as well, because otherwise the first crisis is also the first decision they take alone. Mandate means the team, the banks and the largest customers treat the successor as the person who decides, rather than as the owner’s child. That third condition takes years to build, and it is built only by the predecessor genuinely ceasing to decide.
The most common cause of failure is not a question of competence but of procedure: no agreed rules where there are several siblings and only one works in the business. Rules on who holds shares, who has a vote and how a stake is valued on exit are worth writing down before they turn into a dispute.
Route two: ownership in the family, management outside
The family keeps the shares and the dividend, and a board from outside the family runs the company. Often preceded by a buy-in by an outside manager, sometimes combined with a minority stake for the chief executive so that their interest lines up with the owners’.
This is the variant for a healthy company with no successor, or none who wants it. It has two conditions. First, a supervisory board or some other body that genuinely holds the management to account, because the owner is no longer in the building every day. Second, the company has to be able to run without the founder, which means the relationships with key customers and the knowledge of how things work cannot sit in one head. That is the same requirement a buyer tests, and it is set out in the red flags checklist.
Route three: a sale to an outside party
This is not a failure of succession but another way of carrying it out: instead of the company, the next generation receives capital. The choice of buyer decides more than the price here, because a trade buyer, a fund and a management buy-out each leave behind a very different company. We compared the three in our piece on who buys Polish companies.
Two things come up in family firms more often than elsewhere. The first is an earn-out and a transition period, because the buyer wants the owner to stay a year or two and hand the relationships over. The second is a non-compete that also covers the children and the family’s other companies, which is easy to miss at signature.
A separate matter is the property that formally belongs to the company but is in practice private: real estate, cars, agreements with family members. Carving that out before the process is far cheaper than explaining it to a buyer during the review.
The family foundation: a tool, not a route
Since 2023 Polish law has allowed shares to be contributed to a family foundation. The foundation solves what falls apart fastest in multi-generational firms: shareholdings fragmenting across successive inheritances, and no agreed rules on distributions.
It is worth being clear about what it is not. A foundation does not answer the question of who runs the company, and it does not replace the decision between the three routes. It is a way of holding ownership together, not a way of finding a successor. The tax and legal consequences of contributing shares depend on the specific structure and need to be worked through with a tax and legal adviser; none of this is legal advice.
Where to start
With a conversation in the family, held earlier than feels necessary. Three questions worth having answered in writing: who wants to be an owner, who wants to run the business, and what happens if those two answers do not line up.
The numbers come after that. A valuation is needed here even when you are not selling, because without one there is no fair way to settle with siblings who do not work in the business. Each of the three routes takes two to five years to prepare. That time is the one thing you cannot buy back later.
See also
- MBO, MBI and the non-compete in the glossary
- Who buys Polish companies: trade buyer, fund, search fund
- Red flags: what a buyer examines before naming a price
- Frequently asked questions about selling a company
About the author
Łukasz Brzyski runs Brzyski & Partners Management Consulting. He advises on the sale and purchase of companies valued between PLN 10 and 50 million, and sold two companies he co-founded before he started advising others. More about the author