Generational succession in family businesses in the Valencian Community

What is generational succession in a family business?

Generational succession is the process by which the management and ownership of a family business pass from one generation to the next, ensuring the continuity of the business. In Spain, family businesses account for more than 90% of all businesses according to the Instituto de la Empresa Familiar (IEF, Spanish Family Business Institute), and 372,121 companies operate in the Valencian Community (Comunidad Valenciana) according to the INE's DIRCE 2025 (Spain's central business register). This process is one of the greatest economic and emotional challenges a business owner can face.

It is no exaggeration to say that generational succession is a matter of business survival. Many family businesses do not make it to the second generation, and even fewer to the third. Behind each of those cases are families who spent decades building a business and who, for lack of planning, watched it disappear.

In Valencia, Alicante and Castellón, this reality is particularly urgent. Many owners of SMEs in services, manufacturing, retail and technical installations are approaching retirement age without a clear succession plan. The Valencian Community, with its dense business fabric, is especially exposed to this challenge.

Why does succession fail in so many family businesses?

One of the most common causes of failed succession is a lack of advance planning. Many business families move towards succession without a formal succession plan, without a map, trusting that "it will sort itself out when the time comes".

The reasons behind this lack of planning are understandable, though no less dangerous for it:

• Avoiding family conflict: Talking about succession means talking about who inherits, who is in charge and who is left out. Many families prefer to postpone that conversation indefinitely.
• The founder's false immortality: The owner who has led the business for 30 years feels, understandably, that they will always be there. Delegating is seen as a weakness.
• Not knowing the process: Many business owners do not know where to start. They are unaware of the legal, tax and organisational tools available.
• The children do not want to continue: This is the elephant in the room. In the Valencian Community, as in the rest of Spain, many children of business owners choose careers far removed from the family business. And that is fine — as long as alternatives are planned.

The emotional factor

You cannot talk about generational succession without talking about emotions. For many business owners in Valencia, their company is not just a livelihood: it is their identity. They have spent more hours in the industrial unit in Paterna or the workshop in Elche than in their own home. Letting go of that bond is painful, and that pain often turns into paralysis.

This emotional component is not a minor obstacle — it is often the main obstacle. And the only way to manage it is to start talking about the subject early enough, ideally with professional support that helps separate business decisions from family dynamics.

What is a family protocol and why do you need one?

A family protocol is a formal agreement between the members of a business family that governs the relationship between the family, ownership and management of the business. It is the document that sets the rules of the game before conflicts arise.

In the context of generational succession, the family protocol fulfils essential functions:

1. It defines who can join the management — It sets objective requirements (education, outside experience, assessment) for a family member to hold a management position. This prevents a son or nephew from "getting in because they are family" without being prepared.

2. It governs ownership — It determines how shares are transferred, whether family members have pre-emption rights, and how shares are valued if a member leaves.

3. It separates roles — It distinguishes between being an owner (holding shares), being a manager (making management decisions) and being an employee (holding an operational position). One person can be all three, one or none.

4. It creates family governance bodies — Such as the family council or the family assembly, which provide a forum to discuss matters affecting the business without mixing them up with Christmas dinners.

5. It establishes conflict-resolution mechanisms — Mediation, arbitration or exit clauses that allow disagreements to be resolved without destroying either the business or the family.

When should the protocol be drawn up?

Ideally, the family protocol should be drawn up when things are going well, when there is no urgency or conflict. In practice, many families tackle it when tensions already exist, which makes the process enormously more complicated. If you run a family business in the Valencian Community and do not yet have a protocol, the best time to start is now.

The phases of a well-planned generational succession

A successful generational succession does not happen overnight; it is a process that requires several years of deliberate preparation. These are the fundamental phases:

Phase 1: Diagnosis (6-12 months)

Before making decisions, you need to understand the real situation:

• Are there family candidates? Not just whether there are children or nephews and nieces, but whether any of them has a genuine interest, the ability and the vocation to lead the business.
• How dependent is the business on the current owner? If all the knowledge, customer relationships and important decisions go through a single person, the business has a risk-concentration problem that must be solved before any transition.
• What is the financial and legal situation? Debts, contracts, pending litigation, tax position — everything must be clear and in order.
• What does the current owner really want? To retire completely? To keep an advisory role? To obtain liquidity? The answers shape the whole plan.

Phase 2: Preparing the successor (1-3 years)

If a successor has been identified within the family, this phase involves:

• Specific training: The successor must know not only the business but also financial management, team leadership and business strategy.
• Outside experience: It is advisable for the successor to work for at least 2-3 years outside the family business before joining. This gives them perspective, credibility with employees and skills they would not have acquired "at home".
• Gradual integration: Starting in operational areas, moving on to running a department, and finally taking over general management. Each step should have measurable objectives.
• Mentoring by the founder: The current owner must actively support the successor, not simply "let them learn on their own".

Phase 3: Transition (1-2 years)

The actual handover of power:

• Communication to employees, customers and suppliers: Done gradually, positively and professionally.
• Transfer of key relationships: Introducing the successor to the main customers and suppliers, not as "the boss's son or daughter" but as the new leader.
• Real delegation of decisions: The founder must let go progressively, even when they do not agree with all of the successor's decisions.
• Defining the founder's post-transition role: Honorary chair? Board member? Full retirement? It must be clear to everyone.

Phase 4: Consolidation (1-2 years)

The successor is already leading, but the process is not over:

• Adjustments to strategy and operations.
• Managing resistance to change from long-serving employees.
• Possible restructuring of the management team.
• Regular evaluation of the new management's performance.

What happens when there is no family successor?

This is the reality for many businesses in the Valencian Community. No family member is willing or able to carry on the business. And this scenario, far from being a failure, is simply a reality that requires a different plan.

The main alternatives are:

1. Sale to a third party

Selling the business to an outside buyer — whether an investor, a competitor, an executive from the sector or a business group — is a perfectly legitimate option and often the best one for all parties. The founder obtains liquidity, the employees keep their jobs under new management with renewed energy, and the business continues.

The key is to prepare the business for sale well in advance. A business that is excessively dependent on its founder is worth less and is harder to sell. If you are in this situation, we recommend reading our complete guide to selling a business in the Valencian Community to understand the process step by step.

At Alcara Partners we support owners of Valencian SMEs throughout the sale process: from the initial valuation to completion, in complete confidentiality.

2. Management buy-out (MBO)

Selling the business to the managers or key employees who already work in it. This option has the advantage of guaranteeing continuity, as the buyers already know the business, the customers and the processes. The main drawback is usually financing: employees rarely have the capital needed to buy the business outright, so deferred payment structures or external financing are usually needed.

3. Professional outside manager

Hiring a professional managing director to run the business while the family retains ownership. This option makes it possible to preserve the family's assets without any family member having to run the business day to day.

4. Orderly closure

If none of the above options is viable, a planned closure allows the assets to be liquidated in an orderly manner, employment and tax obligations to be met, and a business cycle to be closed with dignity. It is always better than abandonment or sudden insolvency.

How to prepare your business for any succession scenario

Regardless of whether the succession will be within the family or external, there are actions every business owner should take to prepare their business:

Reduce owner dependence

This is one of the most important factors. If the business does not work without you, neither your family nor any buyer will want to take on that risk. Specifically:

• Document the key processes: So that any competent person can understand how things are done.
• Delegate customer relationships: You should not be the only contact for the main customers.
• Build a management team: Even a small one — you need people who make decisions in your absence.
• Systematise what is in your head: Prices, terms with suppliers, technical know-how — everything must be accessible.

If you need help transforming your business and making it less dependent on you, at Alcara Partners we offer operational consulting services specifically designed to prepare family businesses for succession or sale processes.

Put the finances in order

• Completely separate personal expenses from business expenses.
• Make sure the accounts reflect the reality of the business.
• Resolve any outstanding tax or legal contingencies.

Look after the team

• Key employees should feel valued and secure in the face of the transition.
• Consider retention bonuses or continuity agreements for indispensable people.
• Communicate transparently when the time is right.

Start earlier than you think necessary

One of the most common mistakes is starting late. Starting the succession process with 2-3 years to spare leads to better results — in sale price, in the quality of the transition and in personal well-being — than doing it in a hurry.

Generational succession in figures: the Valencian urgency

To gauge the scale of the challenge in the Valencian Community:

These numbers are not abstract. They represent workshops in Elda, installation companies in L'Horta, shops in Castellón de la Plana, factories in Ontinyent. They are businesses that create jobs, pay taxes and sustain local communities. And many of them will disappear if action is not taken in time.

Frequently asked questions about generational succession

How much time do I need to plan a generational succession?

It is advisable to start planning several years before the planned retirement date. This period allows you to train the successor, reduce dependence on the founder, put the finances in order and manage the transition gradually. If there is no family successor and the option is to sell, the minimum advisable period is 2 to 3 years.

What do I do if my children do not want to continue the business?

It is a common situation and should not be experienced as a failure. The alternatives are clear: sale to a third party, an MBO (sale to the current managers), hiring a professional managing director or, as a last resort, orderly closure. A sale allows the founder to obtain liquidity and can secure the continuity of the business and of the existing jobs.

Do I need a family protocol if my business is small?

Yes, although it can be simpler than that of a large company. Even in an SME with 5 employees, having in writing who inherits the shares, under what conditions a family member can join the business and how disagreements will be resolved prevents conflicts that can destroy both the business and family relationships.

Where do I start?

The first step is to know the real value of your business. Our free valuation tool gives you an indicative estimate in a few minutes. From there, we can have a confidential conversation about your options.

Conclusion: generational succession is not a problem, it is a decision

Generational succession in a family business does not have to be a trauma. It can be an orderly, even positive, process that secures the continuity of the business, protects the family's assets and allows the founder to retire with peace of mind.

But for that to happen, you have to start planning it. And the best time to start was always five years ago. The second-best time is today.

If you have a family business in the Valencian Community and are thinking about the future — whether a succession within the family or a possible sale — we are here to help.

Request your free valuation or talk to us about your situation. Confidential, no obligation.

References

• Instituto de la Empresa Familiar (IEF, Spanish Family Business Institute). La empresa familiar: cifras (The family business: figures). www.iefamiliar.com
• INE (2025). Directorio Central de Empresas (DIRCE) a 1 de enero de 2025 (Central Business Register). Active companies by autonomous community. www.ine.es