An estimated 40 percent of family-owned businesses in the U.S. are expected to experience a leadership change in the next two decades due to baby boomer retirement. The critical issue: Who will be the new leader?  More specifically, will that be someone from inside the family or an outside CEO? And as only 30% of all family businesses survive beyond the founder's phase - dropping to 12% after the third generation - how do you ensure longevity of your enterprise?

As you determine the best path for the leadership of your company, here are several common questions to consider:

  1. Is There a Qualified Family Member Willing to Succeed You? Handing over the CEO reins to a family member just because you feel that is the way it "should" be done is courting potential disaster. When considering a family member, ask yourself if they are truly invested in the business and if they have the skill set required to be a successful CEO. Sometimes, family members frankly aren't that interested in maintaining the family business but would feel obligated if asked to do so. Or they just don't have the business acumen and industry knowledge that is needed. In either case, choosing someone from outside the company may be in the best interest of your employees, stakeholders, and customers.

  2. Is There More Than One Family Member Who Wants The Job?  Another reason to consider searching outside the company is that there may be more than one family member who might be vying for the position, and choosing the successor could cause dissension among the other family members. By selecting a leader from the outside, it can be easier to give family members equally viable jobs - for example, designating a VP of Sales, VP of Production, and VP of Operations - while having the outsider CEO lead and groom the appropriate family member over time.

  3. Would an Outside CEO Bring New Ideas to the Company?  Often, company insiders and family members are so invested in the way things have been done that they are not as capable of bringing fresh perspective or outside industry knowledge that another leader might. An outside CEO will have different experiences, contacts, and expertise that could keep the company moving forward.

  4. Will Family Members Support the Direction?  Nothing will derail an outside CEO's power quicker than animosity from inside the company - particularly from disgruntled family members/owners. If you decide to use a non-family member as the next CEO, make sure that you have had sufficient discussion with all key family members to ensure everyone buys in to that direction and is fully on-board.

  5. Could an Outside CEO Serve in an Interim Capacity?  There's always the possibility that a family member might be right for the position - eventually. An outside CEO can serve a valuable mentorship role in helping create a smooth transition from one generation to the next and then serve on the Board of Directors once the succession planning is complete.

  6. Are You Ready to Let Go?  It's vital to look inward. As the current CEO, are you ready to make the split and hand off the company? If not, you need to develop a transition plan. Nothing hampers a new CEO more than knowing that the former leader is second-guessing and micromanaging his decisions, regardless of the familial relationship. While you might be eager to retain control through a board position or other critical role, make sure that you have accepted the fact that day-to-day decisions will no longer be in your purview. Developing a clear plan of succession for leadership positions is one of the most challenging - but important - decisions you will make at this point in your tenure. The future success of the company depends on choosing a CEO from inside or outside who has the skills, desire, and expertise to lead the company into the future.

What's your succession plan?

Brandt A. Handley has more than 15 years of experience in senior level general management, recruiting top executive talent and in international marketing & sales leadership and operational roles with the top Fortune 50 companies. He has held director, vice president and executive level positions with The Procter & Gamble Company and The Walt Disney Company in EMEA, the Middle East, the Americas and Asia Pacific regions. Follow him on LinkedIn.