Family businesses are a huge part of America’s economic landscape. But some 70 percent of family businesses do not outlast the first generation, according to Harvard Business Review. And of the 30 percent that make it to a second generation, only 12 percent survive to be passed down to a third generation.
Family Business Success Tips
If you own a family business, how can you ensure yours beats the odds? Here are seven secrets of successful family businesses.
1. Communicate openly. Poor communication is the downfall of many a family business. It can be difficult to be honest with family members or confront them about issues. However, if you don’t air your concerns openly, problems will fester and cause lasting difficulties. Hold regular business meetings among family members and work to nip problems in the bud.
2. Make an extra effort to be fair to non-family employees. It’s common for non-family employees in a family business to feel that they will never advance or enjoy the advantages that family members have. If your business expects to grow (and you’re not the Duggars), non-family employees are essential. You’ll need to work hard to make sure you aren’t favoring family members over other employees.
3. Create a shared sense of purpose. Remind family members of your company’s vision and mission. When family members have a shared set of goals for the business, they’ll be more motivated to pull together. Working together for a common goal can help you overcome personal differences. Focus on the ultimate goal of your business—not only to serve your customers, but also to create a lasting legacy for future generations.
4. Plan for the future. Like all entrepreneurs, founders of family businesses are generally passionate about their businesses. Often, they can’t imagine life without their work, and are reluctant to hand over the reins. However, at some point, everyone needs to step down. Start early to plan for a transition to the next generation. Even if you plan to work until you drop, who knows what circumstances will bring? Having younger family members prepared to step in and take over can be the deciding factor in whether your business lives or dies. Not to mention, it will make life easier if you simply decide you want to go on a two-week vacation one day.
5. Put it in writing. Create a succession plan specifying what will happen to the business if the founder/owner is incapacitated, leaves or dies. This plan should also provide financially for survivors to take ownership of the business; if this requires buying out non-family partners, insurance can help. Talk to your attorney and accountant about developing your succession plan.
6. Involve children in the family business early. Give younger members of the family an opportunity to get a taste of entrepreneurship by working for the family business during summer vacations or as a part-time job. Make sure they get a chance to experience different aspects of your business. Getting hands-on experience will give them a better idea of whether they want to join the business when they’re finished with their education.
7. Listen to all generations. Often, when family businesses don’t survive, it’s because the first generation refuses to listen to the second generation’s ideas for updating the business. At the same time, younger family members are often too quick to overturn old methods or assume that seniors are out of touch. Take time to listen to all points of view, from all ages of family members involved in the business. The more different perspectives you get, the better solution you’ll arrive at.
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