Three mistakes that can destroy your family business
By Hannah Massen
While many entrepreneurs dream of building a lasting business that becomes part of their families’ legacy, family businesses have low survival rates beyond three generations. Data suggests that around 70 percent of family businesses fail by the time the second generation comes into power, and only 10 percent are still open by the time the third generation takes charge.
Mergers and acquisitions are often blamed for “killing off” family businesses, as many small business owners have no choice but to sell under the pressure of harsh economic demands. But sometimes the problems start from within, as family feuds and poor preparation set family businesses up for uncertain – or unlikely – futures.
If you want your family business to stand the test of time, avoid these three mistakes.
Poor succession planning
Big companies have the luxury of determining their new leadership with a clear rank and order, but nuanced dynamics can make succession planning far more difficult for family business owners. Sometimes owners will assume that their sons, who spent high school summers working in-store as cashiers, will want to take their places. Other times owners will allocate roles to the family members whom they think are most qualified for those positions. Even though your nephew was captain of his college baseball team, that doesn’t mean that he’ll make a good manager – just like your son might have been grateful to have the summer job when he was 16, but he’s currently working on a film set.
While it’s hard for most people to relate to the characters in Succession or Yellowstone, the moral of the story holds true: mixing family and business can be a slippery slope. On the one hand, it’s nice to have extra empathy when you need to take a personal day after a bad breakup. On the other hand, it’s hard to participate in an end-of-year review meeting when your coworkers just rehashed your love life around the Thanksgiving table. Sibling rivalry, disputes between extended family and having different values and priorities can splinter what should be a unified front.
While disagreements are bound to arise in any workplace, members of family businesses are at a particular disadvantage. Work stress tends to follow them home because, well, the person they were arguing with lives there too. Having a clear separation between work and home will allow you to treat each other like both colleagues and loved ones when appropriate. Table work discussions when you’re out of the office, and find non-work-related reasons to spend time with your family members.
Reluctance to seek outside help
Family business members don’t just work with those closest to them. They overcome challenges together, share their greatest achievements, have a deeper understanding of each other’s personal and professional lives and work toward a shared dream. Between all of that, it’s only natural to take on an “us against the world” mentality. But there may be gaps in your collective knowledge base where outside help could be beneficial. Trusted advisors outside the family not only lend you a greater depth of experience, they also enable you to look at your team’s potential shortfalls from an objective perspective.