Research shows that most family businesses globally do not survive beyond their founders. Despite making up more than 90% of the world’s enterprises, only one-third of family businesses are passed on successfully to the next generation. Even more concerning, only 30% reach the hands of grandchildren who choose to continue their legacy.

According to personal finance publication GoBankingRates, a staggering 70% of wealthy families lose their wealth by the next generation, and 90% by the generation after that. This loss of generational wealth spans across assets such as cash, investment funds, stocks, real estate and businesses. In 2022, Boston-based consulting firm Cerulli Associates projected that the world’s ultra-wealthy will transfer an estimated $84.4 trillion in assets by 2045, primarily to heirs and charities, with Baby Boomers expected to transfer 63% of this wealth.

While family businesses remain one of the oldest methods for wealth transfer, there is another equally ancient but overlooked mechanism: the transfer of human capital. A fascinating study released by Bank of Italy economists Guglielmo Barone and Sauro Mocetti in 2016 found that today’s top earners in Florence are direct descendants of the city’s wealthiest residents from six centuries ago. By linking top earners’ surnames and tax records from 1427 to 2011, the study revealed career dynasties spanning elite professions like law, banking, accounting and medicine.

In many cases, these modern descendants are employed in the same professions as their ancestors, signalling that wealth and status have been passed down through professional legacy, not just financial inheritance. These Florentine families have essentially used high-status careers to safeguard and grow their wealth since the Renaissance — the period that marked Europe’s cultural and scientific rebirth, driven by figures such as Leonardo da Vinci and Michelangelo. It was also during this time that modern banking and accounting emerged.

The key takeaway from the Bank of Italy study is the existence of a metaphorical "glass floor" that protects upper-class descendants from sliding down the economic ladder. Other studies confirm a strong correlation in social mobility between grandparents and grandchildren across Europe, with wealth preservation sometimes extending five generations.

However, family businesses — ranging from small mom-and-pop stores to regional powerhouses and multinational giants — remain the most studied form of wealth inheritance. In Germany, family-owned enterprises make up a large portion of small and medium-sized businesses, known as "Mittelstand" companies. These businesses are the heart of the German economy, accounting for more than half of the country's GDP and employing around 60% of its workforce. Some have operated for more than 500 years, passing through the direct descendants of their founders.

South Africa, too, is home to several longstanding family businesses. The country's oldest is, Boplaas 1743, a fruit exporter and jewellery designer that has remained in the Van der Merwe family for 10 generations. Other prominent families such as the Ruperts, the Oppenheimers, the Ackermans, the Sassoons, the Bells, the Maponyas, the Motaungs, and most recently, the Motsepes, have successfully handed down their business empires across generations.

But the reasons for the widespread extinction of family businesses have been well-documented. Scholars cite a lack of succession planning, internal family conflicts, nepotism, disregard for meritocracy, and failure to innovate as key factors contributing to their demise. To overcome these challenges, heirs must be both committed and responsible stewards of their family legacies. Surrounding themselves with trusted advisers and expert teams can help them preserve or even enhance the founder’s vision.

Crucially, scholars also advise that heirs do not necessarily have to be operators or executives within the family business. Instead, they can contribute by developing the skills necessary to become responsible owners who can elevate the business to new heights.

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