Running a family business has a certain allure. Get it right, and you’ll capitalize on a wellspring of passion, cohesion, familiarity, and resilience. But without enough care and planning, the business can quickly degenerate into a sticky, dysfunctional mess.
These tips and resources can help you get it right.
To an outsider, seeing that a business has been “family owned and operated since 1950,” gives an impression of permanence, sound management, employee commitment and loyalty- solid values in a world that seems to be constantly in a state of flux and fleetingness.
To those on the inside, a family-owned business can be a frugal and potentially lucrative business arrangement that takes advantage of a known pool of experience, skills, and resources and creates a situation where all the family members involved are more committed to the company’s success.
But for all the potential that a family business brings, it so easy for things to go wrong- sometimes very wrong. After all, with family the slate is far from clean, and a simple, careless act can quickly ignite a fury of old grudges, resentments, and feuds. It can create some new ones as well, and unlike a non-family owned business, it will be much harder to push certain issues under the proverbial rug or just grin and bear it. How can you when the issue is with your mother, brother, or spouse?
So, the bottom line to all of this is that you want to approach a family business with more care and consideration than you would a non-family owned company. To that end, as an addendum to my previous Frugal Small Business Startup series, I wanted to create a collection of tips and resources specifically for those thinking of starting and running a family business.
Over the next few weeks, I’ll be covering the following topics and then offering some additional resources, so be sure to check back:
- All in the Family? Then, It’s All in the Planning
- Preventing Relationships from Becoming Rivalries
- Letting Outsiders In
- Putting the Success in Succession
- A Collection of Family Business Resources
Lastly, in case you’re wondering about the makeup, prevalence, and impact of family-owned businesses, here are some eye-opening statistics on family business in America from the Family Firm Institute:
- The greatest part of America’s wealth lies with family-owned businesses. Family firms comprise 80% to 90% of all business enterprises in North America. (J.H. Astrachan and M.C. Shanker, “Family Businesses’ Contribution to the U.S. Economy: A Closer Look,” Family Business Review, September 2003)
- FOBs contribute 64% of the GDP or $5,907 billion ($5+ trillion) and employ 62% of the U.S. workforce. (J.H. Astrachan and M.C. Shanker, “Family Businesses’ Contribution to the U.S. Economy: A Closer Look,” Family Business Review, September 2003)
- More than 30% of all family-owned businesses survive into the second generation. Twelve percent will still be viable into the third generation, with 3% of all family businesses operating at the fourth-generation level and beyond. (Joseph Astrachan, Ph.D., editor, Family Business Review)
- The leadership of 39% of family-owned businesses will have changed hands in the next five years. (Raymond Institute/MassMutual, American Family Business Survey, 2003)
- Young family firms and old family firms (50-year-old threshold) outperform non-family firms.
- 19% of family business participants have not completed any estate planning other than writing a will; only 37% have written a strategic plan; and over 60% are very positive about their company’s future. (Raymond Institute/MassMutual, American Family Business Survey, 2003)
- 85% of family-owned firms that have identified a successor say it will be a family member. (Raymond Institute/MassMutual, American Family Business Survey, 2003)
- In a study of S&P 500 firms (Anderson and Reeb, 2003): 33.6% are family businesses in which the founding family has, on average, 18% of firm equity.