Ancient Chinese Secret? The Key to Family Business LongevityBy Nina Kaufman, Esq.
Thanksgiving is a day of gratitude, an opportunity to be with family. So on this family day, it’s somewhat fitting to have this post about family businesses.
If you are, or have any inclination to be, in business with a family member, there is a secret to ensuring its success. Some firms have been family-owned for thousands of years. Others have turned into major corporations. What will yours turn into? A thriving dynasty? Or a cesspool of squabbling?
As reported in CNNMoney.com (thanks to Investors Business Daily), although family-owned businesses represent about 85 percent of companies in the U.S., only about 12 percent survive to the third generation. Looked at another way, 88 percent of 85 percent of companies in this country either go out of business altogether or fail to stay within the family. That’s a huge percentage.
So what’s the secret to getting along? Having a succession plan. Not such an exciting secret, perhaps, but fewer than 70 percent of all family-owned companies have one, according to the article. A succession plan brings up issues that families don’t like to discuss, sometimes because they raise uncomfortable truths. Uncle Harry can’t be trusted with the bank accounts. Sister Sally is an incompetent. Cousin Carrie couldn’t care less about being involved in the business but might resent her Brother Bob’s windfall because he’s a vice president. These issues make Thanksgiving dinner a potentially uncomfortable event … and many families would prefer to sweep contentiousness under the rug. As a result, nothing gets planned, Grandma Georgina (who founded the company) remains a control freak unable to part with having a say in the business, the employees become thoroughly disgusted with the lack of direction, and the company goes mechullah (bankrupt).
Remember, family business has two components: family and business. It may be good family relations to avoid succession planning issues, but it’s not good business.