Trust, accountability, and determination make family owned businesses successful
The decision to start family owned businesses is a commitment to building something that will provide for your family today and beyond. Yet according to the Family Business Institute, 30 percent of family businesses survive beyond the first generation and are passed on to the second generation. Only 12 percent of family businesses make it to the third generation of owners.
According to Andrew Keyt, executive director of the Loyola University Chicago Family Business Center, there are identifiable patterns in those family businesses that make the cut. Writing for Entrepreneur, Keyt observed the recurring themes that drive success across generations.
“Those businesses that survived three, four, five generations were powered by four distinct forces,” Keyt notes. Those forces: family unity, a commitment to a set of values, a unified vision, and preparing for the next generation.
Family values play a critical role in making family owned businesses successful
A recent Forbes article noted the vital role family values played in the success of family businesses. Forbes pointed out that strong family values can drive extreme productivity.
“They can stabilize the structure and dynamics in the family,” the magazine noted. “As such, they can substantially influence the way the family business is organized, as well as the way both family members working in the firm and those who do not interact with each other around company decisions.”
Put another way, families with strong, shared values strengthen their family owned businesses because they have structure to guide decision making for the company. These values not only drive business success, but the business itself becomes a conduit for transferring values to new generations.
In fact, of the more than 300 businesses Forbes surveyed, 90 percent identified transferring the family’s values from one generation to the next as one of the key reasons they began the family business.
“The decision-making at most family businesses is predicated on the values of the family,” Forbes writes. “They are seen as critical to the success and future of these companies.”
Successful family owned businesses drive the economy
According to the Conway Center for Family Business, family-owned businesses drive more than 60 percent of the U.S. gross domestic product and account for more than 60 percent of the country’s jobs. This means family businesses account for the vast majority of dollars earned and jobs created in the nation. This makes successful family-owned businesses the backbone of the American economy.
“Studies have shown about 35 percent of Fortune 500 companies are family-controlled and represent the full spectrum of American companies from small businesses to major corporations,” the Conway Center points out. “The greatest part of America’s wealth lies with family-owned businesses. According to the US Census Bureau, family firms comprise 90 percent of all business enterprises in North America.”
Even though 90 percent of all businesses in America are family-owned or family-controlled, only 30 percent are passed onto the next generation. This means new family businesses are opening up every day at a staggering pace.
Twenty-four years: the lifespan of family-owned business success
The Johnson College of Business at Cornell tracks family business success across multiple decades. According to their research, the average lifespan of a family-owned business is about 24 years.
Johnson College points out that a single factor accounts for almost half of all family business collapses. According to their research, 48% of family businesses’ failures were precipitated by the founder’s death.
In other words, the companies were successful, thriving enterprises. They just lacked a mechanism to effectively transfer ownership from the first generation to the second generation of owners.
When you take these factors into consideration, it becomes clear there are a few common traits that make family businesses successful.
Preparing for the future makes family-owned businesses successful
The first step of preparing future generations for a family business is to establish clear succession plans. Working with a qualified business success specialist can help your company successfully navigate succession between generations.
While many business attorneys have experience in succession plans for family owned businesses, you may have difficulty finding someone to help you create a plan to keep your family owned business successful after you’re gone. The Family Business Institute provides succession planning services for small family businesses.
Establish clear expectations based on your family’s shared values
Successful family-owned businesses operate on shared values. However, those values aren’t just floating out in the ether. They’re a core part of what makes the family tick.
When you’re setting out to make your new family owned business successful, make a list of the values that drive your decisions. Businesses that thrive are almost always about more than just making a profit. Success in business comes from serving customers, giving back to the community, or providing a vital service.
Once you’ve made a list of your core values, use these to craft a mission statement for your business. Captures what you hope to accomplish for your family. Then, sit down with the family members you’re doing business with and share these values with them. With your core values and mission statement in writing, you can ensure everyone is on the same page – literally!
Maintain communication about the business and its progress
Making a family owned business successful requires effective communications skills. Often, these skills seem superfluous between members of a family. After all, you know that “look” on your brother’s face or the meaning behind your spouse’s chuckle. Why hash it out in words or emails?
However, the single largest obstacle to successful family businesses is the lack of effective lines of communication. Family businesses fail when the family doesn’t keep in touch about the business.
Schedule regular meetings to go over each family member’s area of the business to communicate goals and opportunities. At the same time, these meetings present opportunities to educate employees and the family about the business itself, how it’s doing, or how to grow it.
It’s also vital you start by establishing clear, concise methods for resolving conflicts. If there is a disagreement, how does the family resolve it?
Maintaining these lines of communication is the first step to establishing a clear vision for your family owned company’s success.
Building a successful family owned business is rewarding
There is one final reason to consider opening a family-owned business: the rewards that come with knowing you’re building something that will help take care of your family for generations to come. Though it may be a challenge at first, making your family owned business successful is definitely worth the effort.
“While there are considerable challenges when you transition your business to the next generation, there is also a considerable reward for those that do it successfully,” Keyt notes. “Beyond financial gains, the successful multi-generational family business creates strong and enduring family relationships, makes significant contributions to their communities and establishes a legacy for future generations to be proud of.”
N-Hance is committed to making your family-owned business successful
If you’re ready to begin the journey to a successful family business, consider becoming an N-Hance owner. Our unique wood refinishing franchise is ideal for building a multi-generational enterprise with unlimited expansion potential.
For more information about N-Hance franchise, visit our research pages. Or, if you’d like to get started with ownership, request our free franchise information report and an N-Hance franchise team member will be in touch with you shortly.