Over 80 percent of all businesses in the U.S. are family owned. Only 30 percent of them get successfully passed to a second generation and it gets more difficult over time. Statistics show only 13 percent are transferred onto the third generation.
Here are the key characteristics that can improve the success rates of future generations of any family business.
1. Start in the business at a young age.
Brad Factor has been working at his family’s Chicago Messenger Service ever since he was five years old. He wanted to spend every day off of school at the office with his dad working instead of playing with friends.
2. Learn the business from the bottom up.
Over the years, Brad has grown up learning the business from all angles. As soon as he got his license, he would drive to the warehouse to unload trucks, build skids and do deliveries. During college, Brad would come into work taking orders, dispatching and attending industry trade shows.
3. Share the same goals and values.
Brad said “I was always taught since I was young, to be blessed for every delivery that comes in. We cherish a customer who calls in one order a year the same as a customer that gives us thousands of deliveries a day.”
4. Learn from past generations.
Brad and his sister, Amanda, are always listening to Bill, their boss and father. They learn how he conducts business and deals with employee situations. Hy Factor, Bill's father and the company founder, still comes into the office every day. He is their mentor and the face of the organization. He is highly respected and everyone loves to get his advice.
5. Work harder than the other employees.
Many third-generation owners feel entitled based on the past success of their family's business. Brad says “They don’t want to go out there and work and get their hands dirty. They take the easy way out and this leads to failure. Nepotism is considered a negative in the business world, and family members need to work above and beyond the regular employee to earn their respect."
6. Be nimble in switching roles from parent and child to boss and employee.
Domonic Biggi, the third-generation owner of Beaverton Foods in Hillsboro, OR points out that operating in a family business can be confusing. “In one setting you’re father and son and in another setting you’re talking about specific business issues like label design, product development …” It is very difficult for family members to keep it all straight, but successful family businesses know where to draw the boundaries.
7. Evolve the business.
The current generation running the company needs to stay open to new technologies and realize the business is always evolving. Noelle Nese Mercer at Galco's Soda Pop Stop! in Los Angeles says “younger generations need to stick to their guns since new technology will not always be embraced” by the current leaders. Lee and Aric Shlifka of Kiddles Sports thinks that “What was once a solid selling technique doesn't necessarily hold true through 45 years of business. Our grandfather’s belief was stock them high and watch them fly! Now, you not only cannot afford to stock so heavily, the perception is less is more when displaying your product (a la Apple).”
8. Value family rituals.
Brad says that his family goes to a local Chicago restaurant, Manny’s almost daily. This adds familiarity, fun and an appreciation of history to their day.
9. Preserve the family reputation.
Thayer Wiederhorn of Fatburger, wants to remind every family owner that “you have to be very conscious of how you carry yourself socially as your actions inside and outside of work reflect not only on yourself, but also on your family’s and brand’s reputation.
10. Leave business at the office.
Martin Killgallon at Ohio Art (the makers of Etch-A-Sketch) describes the key to maintaining balance between family and business is to “treat each other with respect and leave the business at the office.” Brad remembers that his mother always sets the tone. He remembers that eventually at family gatherings she states “that’s enough business, let’s talk about something else.”
Are you part of a family business? What is your advice for running a successful company?