Sam Dunn and his cousin, Barry, had transformed Dunn Lumber from a hardware and crockery business, started in 1905, into a seven-location, $56 million LBM operation with 120 employees by the time the business celebrated its 100th anniversary in 2005.

Within two years of that party, however, a year in which the Dunns also created an employee stock ownership plan (ESOP) that transferred 14% of the company's ownership to its workers, the Dunn Lumber chain was absorbed into ProBuild Holdings, the Colorado-based conglomerate that ranks first among pro dealers in sales, locations, and employees.

Today, the Dunn Lumber name is no longer a fixture in central and eastern Florida, its location signs replaced with ProBuild banners, though several employees and location managers remain. Sam Dunn continues to consult with the "new" company, and even keeps an office at the Daytona Beach location as part of the ownership and management transition to ProBuild. But for the most part, he is retired.

A sad story? Maybe to some, especially owners of the relatively small, family-run, closely held independent LBM operations that still dominate the industry in combined numbers and sales in spite of consolidations. But dry your eyes: Though terms of the ProBuild acquisition of Dunn Lumber were not disclosed publicly, Sam Dunn points out that he and his cousin, other shareholding members of the family, senior executives and managers, and employee owners received fair compensation in the deal, and most of the employees kept their jobs.

And Dunn is not alone. Less than a third of all family-owned businesses survive into a second generation, according to the Family Business Review. Only 12% are viable into a third generation, and less than 3% make it into a fourth, in part because estate and succession planning gets progressively more complicated during those transitions. Some of those businesses simply go away, but others are sold off so that the owners can cash out and retire after decades dedicated to the business.

The sellout scenario is especially common among founders or senior generation owners who have no heirs to take over the business. If they did, they'd likely be among the 85% of family-owned businesses that have identified a younger family member as a successor, according to the American Family Business Survey.

"Most founding or older generation owners want to pass the business to a succeeding generation," says Wayne Rivers, president of the Family Business Institute in Raleigh, N.C. "It keeps the family unified around a common purpose, and passes on important values for business and personal success."

Neither selling out nor passing the baton to a younger generation owner is easy, however. Experts who broker business sales or consult on succession plans agree that a thorough strategic planning process is essential to understanding the value (and values) of the company, identifying a management and ownership future, and charting a course for the business, wherever it leads.