Baltic family business owners eager to hand the business to next generation

Today, Sorainen and Baltic Family Firm Institute (BFFI) presented the results of the first pan-Baltic survey of family businesses. 

The survey has revealed that Baltic family firm owners are eager to hand over their businesses to the next generation. Nine out of ten Lithuanians and almost as many Latvians, and eight out of ten Estonians who took the survey would like to pass their business to “NextGen” family members.

While the desire to hand over the business to younger family members is clear, the preparedness to do so in an organised manner varies. When asked if the business has a successor – someone who is being brought up to take over the management of the company – 69% of the Latvian respondents, half of the Estonians and only 37% of the Lithuanians answered yes, with the chosen successors almost exclusively coming from among the family members. 

Yet, although the majority of respondents have a successor, most do not yet have a succession plan, a family constitution or a systematic approach to training the successors. More specifically, 44% of Latvian, 27% of Estonian and 25% of Lithuanian respondents said they have a formal or informal succession plan. While Lithuanian and Estonian firms encourage the successors to gain experience outside the family business, majority of Latvians prefer to not encourage such behaviour.

Laimonas Skibarka, partner and co-head of Private Clients team at Sorainen, comments: 

“Though it is a positive trend that as many as 85% of Baltic family business owners want to transfer the business to the next generation, only a minority have done succession planning. International studies show that only about 25-30% of family businesses make it to the second generation, and remaining fail or are sold before the second generation gets a chance to take over. I believe we can do much better in the Baltics and we can achieve that by increasing focus on succession planning. Sorainen, in collaboration with BFFI, is committed to supporting family businesses in this critical transition to ensure their longevity and success through generations.”

Baltic family firms also seem to strongly desire to identify themselves as such. The survey reveals that about a half of the family firms introduce themselves as family businesses (57% in Latvia, 54% in Lithuania, 43% in Estonia). Not surprisingly, in most companies surveyed, family members influence strategic decision-making (78% in Estonia, 75% in Lithuania and 57% in Latvia).

Interestingly, the Latvian family businesses seem to have least tensions among family members in relation to their business. When asked how often they have had difficulties in solving intra-family disagreements related to development of the family business, nearly half of the Latvians said “never”, compared to only a quarter of Estonians and essentially no Lithuanians (only 3%). This aspect appears to be connected to the influence of family values in business. While three out of four Latvians fully agreed that family values play a role in their company, the same is true for less than half of the Estonian and Lithuanian respondents. 

The good news is that family businesses feel good about innovation: most respondents shared that the younger generation has brought innovative solutions or technologies to the company (78% in Estonia, 77% in Latvia and 64% in Lithuania). 

Krista Jaakson, Associate Professor, Board member of BFFI: “We decided to conduct this survey now because family businesses in the Baltics have either only recently undergone or are currently facing the challenges of generational change. Our goal was to gain a comprehensive understanding of their perspective on this process and the role of family values in their overall success. These insights will help us tailor our support and advocacy efforts to better meet their needs.”

This first pan-Baltic survey of family businesses was conducted by Sorainen and BFFI in cooperation with ISM in Lithuania and University of Tartu in Estonia, as well as by University of Latvia (by researcher Jelena Luca). Altogether, 302 respondents took the survey (114 from Latvia, 99 from Estonia and 89 from Lithuania). The respondents were decision-makers in the family firms, mostly representatives of the founder families. Full data of the survey can be found here.