Articles & Alerts
Keeping the Family Business Together for the Long Term
By their very nature, family businesses can thrive on the strength of relationships that run deeper than those between unrelated co-workers. Accordingly, family-run businesses present challenges specific to their structure and ownership. According to the Family Business Alliance, only 30% of family-owned businesses survive into the second generation, and only 12% carry into the third. This indicates that many of these businesses may not have the proper guidance to assist with generational planning.
To ensure your business can remain a thriving enterprise, serving multiple generations of your family, here are some tips to bear in mind.
- Let employment in the family venture be voluntary.
Letting members of the next generations decide for themselves whether they want to work in the family enterprise helps the passing-down of leadership roles be more organic and is a good way to ensure the business’ longevity. In fact, those who want to dedicate themselves to the family business might even benefit from working at other organizations for a time and bringing that perspective and knowledge back to the family entity.
- Bring in outside expertise as needed.
Running any business requires multiple skill sets – everything from marketing and sales to accounting and technology management. To cover this wide range of skills, consider hiring talent from outside the family to fill in any gaps in training or experience.
- Manage with flexibility and accountability.
While a family-run operation inherently provides a more familiar work environment, accountability will keep the business running smoothly and ensure that everyone is treated with respect. Having clear roles and responsibilities for each family member, defining the expectations for each role, and having consequences when those expectations aren’t met can keep everyone on the same page.
- Embrace change.
Families often thrive when traditions are honored and passed on, but it is important to remember the importance of innovation. In any business, it’s essential to embrace change. That commitment could translate into regularly attending industry conferences and tracking trade insights to stay on top of emerging trends. It may also require that the family members who cover different roles regularly pursue the additional education and training that will keep them current with the ways their disciplines evolve. On a company-wide scale, it may also require having the willingness to shift the core function of the business if the demand for once-mainstay products and services wanes and new areas of opportunity emerge.
- Consider setting boundaries between work and family life.
Running a family business can often feel like a 24/7/365 endeavor. As a consequence, burnout can be a problem. To avoid that, it’s often necessary to create some separation between family life and work life. For example, consider avoiding having work-related discussions during family time at home, during vacations and at family get-togethers. Another idea is to appoint back-ups who can be on call when each family member needs to take breaks from overseeing the business.
- Develop and communicate the succession plan well ahead of a transition.
Having open communications about the future of the business and planning for its transfer well in advance of the time it will occur can reduce stress and foster an orderly transition in the ownership of the business. A child or grandchild may elect to pursue a different career path, so regular discussions about future commitments will make passing the baton easier and more organic.
Finding the best of both worlds
To capitalize on a family’s unique connection and commitment to each other, family businesses may still need to adopt some of the rules that enable other types of organizations to flourish. It’s a fine balance because too many rules and requirements can inhibit creative thinking and cause tension. Still, operating with clear guidelines that strengthen team spirit, mutual accountability and the shared vision for the business can help a family-run operation remain successful for many generations.
For more information, or to discuss your family business in greater detail, contact your Anchin Relationship Partner or Michael Greenfield, a Partner in Anchin’s Consumer Products Group.