Reality TV, or so they call it, has delivered a view and variety of life from the absurd to the mundane to our homes. Included in the mix are shows like Restaurant Impossible, Pawn Stars, Shark Tank and more that portray the challenges of business. Family dynamics are often a part of the challenges portrayed.
That is not unusual since it is a dream for many families to establish a business that not only supports the family but also provides employment for the family to work together as a team toward common goals. The hope is usually that the business will do well and become a legacy that is transferred to future generations.
A few facts:
- Family owned businesses comprise over 80% of the businesses in the US and account for 60% of the employment and 65% of all wages.
- Approximately 40% of family businesses will be passed to the next generation but only 40% of these will survive the second generation, 12% to the third and 3% to the fourth generation.
- Of the heads of these family owned businesses planning retirement, approximately 55% have not yet chosen a replacement.
Compounding the numbers are the companies owned by a husband and wife team that are seeking to retire about the same time.
The family owned business is extremely important to far more than the family that owns it. It is a driver of our economy. So what separates the ones of renown, such as the empire started by Sam Walton, from the hometown entrepreneur? Are there guidelines that will create a path with a better chance for success and survivorship? How do you navigate the complexities of the relationships, emotions and responsibilities that come with the package of the family owned business?
There are answers and they are not simple. The answers exist in a matrix where scalability of concept competes with vision. An environment that is often dictated by what is happening in the life of the family, whether it is finances, marriage, divorce, kids, aging or health. All factors driving decisions regarding business. Add to the challenge issues of control, leadership, hierarchy and communications that are all skewed by the family relationships. How do you hold your significant other accountable during the day for business and say I love you as peers when you go home?
Layer on to these challenges, generational issues that may not have the eldest in the founder’s role but rather as an employee. Added issues will arise with siblings, children and more distant relatives who may also be working in the company and destined for future leadership whether it is their dream or not. Then there is also the elephant in the room – money. Income, wealth accumulation and the cost or entitlement of ownership of the company as it is passed through generations.
Most of the answers boil down to a fairly simple question. Would the same decision be made if we were not in a family owned company but, rather, making decisions based on business rationale and information without the family factor? The impact is interesting and far reaching. This one question is often the one that defines the difference between companies that, while family owned, grow beyond the family and have sustainability, transference and value that can be sold. All in the family requires the ultimate balancing act between loving and business.
This week, we will look into the family relationships, opportunities and challenges these bring and options worthy of consideration whether your company is a closely held family business or an enterprise that may have a larger base of ownership including non-family.