Launching Ownership Succession Plans with Gen Z in Mind

For generations, the succession path for ownership of a small or midsize business was often straightforward. When the owner of a business retired, a family member or long-time employee would step up, ready to lead the business into the future. 

Today, that line of succession is becoming less clear. Business owners who are nearing retirement are finding that members of younger generations, particularly Generation Z, approach work, life, and ownership with a fundamentally different mindset. Business owners say this shift is forcing a critical re-evaluation of what it means to pass a business on to the next generation.

The challenge lies in aligning expectations. Members of younger generations often value flexibility, purpose, and work/life balance in ways that may seem alien to those who built their businesses on grit and long hours. 

It’s not that younger generations are unmotivated. In fact, 56% of Gen Z women and 65% of Gen Z men reported feeling pressure to excel both at work and in their personal lives, according to the SHRM report Progress with a Caveat: The Complex Realities for Women in the Workplace.  

The owners and leaders of small and midsize businesses  have the opportunity to work with those values and motivations to shape succession planning. To do so, they need to understand how Gen Z’s values shape succession planning, the risks of ignoring their impact, and strategies that can build a bridge to the next generation.

Understanding the New Guard: Gen Z's Work Values

Gen Z (born between 1997 and 2012) is the first generation of true digital natives, and their worldview is shaped in part by technology, economic uncertainty, and a desire for social impact. This perspective influences their career ambitions and what they look for in an employer. 

Members of Gen Z are more willing to advocate for what they want out of work, according to Holly C. Christianson, SHRM-SCP, director of people at Fort Wayne Metals in Fort Wayne, Ind. 

“Many individuals in previous generations shared the same values, but expressing a desire for those things came with risk. Today, we’ve seen cultural shifts and changing technology reduce barriers and allow people to have more of a voice,” she said.

Sarah Lynch, owner of Baja Bean restaurant in Staunton, Va., saw this change in expression firsthand. After struggling to find young employees willing to work long shifts, she had to fundamentally change her operating model. 

"Now, I’m making all my positions start at 15 hours a week," she said. "I’m hesitant to start anyone at 25 hours a week because they get overwhelmed." She noted that in her experience, younger workers prefer to "work two days, take a day off, and repeat."

This preference for shorter, more flexible hours doesn’t reflect a lack of work ethic — it's about a different definition of success. For many in Gen Z, a fulfilling life is one in which well-being is prioritized and work is integrated rather than placed above anything else. This can be a difficult concept to grasp for business owners who built their companies on the "hustle" mentality. 

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The Risks of a Succession Planning Mismatch

Failure to understand and adapt to these new values presents significant risks for businesses. Owners who delay ownership succession planning or assume they can employ a traditional handover may find themselves without a viable successor.

One major hurdle is the younger generation's apprehension toward the immense responsibility and financial risk of ownership.  

Randy Stanley, the retired former owner of Superior Crane & Rigging in Seffner, Fla., ran into this hurdle when his Millennial son encountered a stark statistic in a seminar on business succession planning. "The guy in that presentation made a statement that 80% to 90% of businesses that get handed down in succession fail," Stanley said. 

While that statistic is based on limited data from the 1980s and is not necessarily reflective of current market conditions, it stuck with Stanley’s son and drove home the enormous pressure of operating a business, particularly in a high-stress industry serving sectors including construction as well as oil and gas. 

“He saw the financial stress, the business stress, and, you know, the debt, and I think it scared him,” Stanley said.

This fear is not unfounded. Younger generations have witnessed economic instability and are often burdened with student debt, making them more risk-averse. The "all-or-nothing" pressure of taking over a business can be a powerful deterrent. Without a clear and supportive transition plan, many potential successors will opt out, leaving the business's future in jeopardy. 

Additionally, a business that doesn't evolve may lose relevance with its future workforce and customer base. If younger employees don't see a path for themselves within the company, they won't stick around. 

“If you don’t keep teaching and training the younger guys, you’re jeopardizing the future of your business. You can’t be there at every job, every day. You have to be able to delegate and put trust in your team, whether they’re moving a $50,000 piece of equipment or a $500,000 piece,” Stanley said.

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Strategies for Engaging the Next Generation 

Successfully passing the torch requires a proactive and flexible approach. Business owners must be willing to adapt their succession strategies to align with Gen Z’s values and expectations.

1. Modernize Operations and Embrace Technology

Gen Z's digital fluency is one of their greatest assets. They are comfortable with technology and can introduce new efficiencies and customer-facing tools that can revitalize a business. 

For Lynch, this involved a new way for customers to pay their bill during a high-volume weekend. Instead of offering full-service sit-down dining, “we opened up seating to first-come, first-serve, and once we took their order, they received their receipt with a QR code at the bottom to pay,” Lynch explained.  

The simple addition of a new payment option streamlined the process, reduced stress for staff, and improved table turnover. By empowering younger employees to innovate, owners can improve operations and better connect with a tech-savvy customer base.

2. Prioritize Mentorship and Phased Responsibility

Direct, hands-on mentorship is crucial for preparing the next generation for leadership. Abstract instructions or manuals are often less effective than personal guidance. 

Lynch found that staff retention improves when she dedicates time to one-on-one training. "It has to be person-to-person," she said. "It's not going to be read in a manual and absorbed in that way." 

This mentorship should also involve gradually increasing responsibility. 

Stanley successfully prepared his son by immersing him in all facets of the business. "You're going to learn to work on the cranes and equipment, not just operate them. I also had him involved in billing and invoicing, because that was all part of the business," he said. 

This comprehensive training builds confidence and competence, making the prospect of leadership less daunting.

3. Redefine the Path to Ownership 

The traditional model of a single successor taking on 100% of the business may no longer be realistic. Owners should explore creative ownership structures that mitigate risk and align with Gen Z’s collaborative nature.

Stanley found a solution by selling a majority stake to an outside buyer while his son retained a percentage of the business. “He still gets a salary and dividends each year based on the company’s success, but he doesn’t have to deal with the hardest parts alone," Stanley said. This arrangement allowed his son to have a stake in the company's success without shouldering the full burden of ownership, ensuring both his security and the continuation of the business.

Lynch is building a plan to ramp down her involvement over the next decade and build up multiple key team members to support the success of her business long term. 

“Once a month, I make time to meet with someone else in my industry and commiserate,” Lynch said. These meetings help keep her focus on succession planning and the potential scenarios for her exit, including an owner-financed sale to one or more current employees. 

4. Adapt Culture to Support Work/Life Balance

To attract and retain younger talent, businesses must adapt to their expectations for work/life balance. This may mean restructuring schedules, offering more flexibility, or shortening shifts. According to new SHRM data, more than a third of workers (35%) said they would leave their current job for one that allows microshifting. 

Lynch ultimately embraced microshifting in her restaurant. “The eight- and nine-hour shifts were not working for most employees,” she said. 

Instead, she created two microshifts, one to cover lunch service and one to cover dinner, with each shift bridged by a long-term employee who could work a longer stretch. This accommodation was key to keeping her business staffed. 

By recognizing that a healthy work/life balance leads to more engaged and less stressed employees, owners can create a culture in which younger generations can thrive.

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The Future Is Collaborative

Gen Z will help keep small and midsize businesses alive, but not by following in the footsteps of their predecessors. They will forge their own path, leveraging technology, building flexibility, and prioritizing collaboration.  

For owners of small and midsize businesses, the key to a successful transition lies in letting go of old assumptions and embracing a new, more adaptable model of succession. 

“The risk to businesses failing to take all generations seriously is that another employer will quickly recruit that talent and leave you wishing you did,” Christianson said. 

By mentoring, modernizing, and meeting the next generation where they are, business owners can ensure their legacy not only survives but also evolves for years to come.