How Family Businesses Can Beat the Odds

The Family Business Institute conducted a study that indicates only 30% of family businesses make it beyond the founder’s generation, and only 12% progress to a third generation. The New York Times spoke to owners of family businesses who have beaten those odds, and here are some of the common themes among those owners:

1. A Willingness to Reinvent: If you just keep doing the same thing for several years in a row, you’re likely to fall behind.

2. No Guaranteed Employment: Maintaining rigorous standards for family members leads to a better workforce. A business should owe not obligation to a family member and no family member should be obligated to work in the business. This ensures that family members are subject to the same hiring, termination, and performance rules that other non-family employees would be.

3. Succession Planning: One method of succession planning that could avoid some hard feelings is to place that responsibility in the hands of the new leadership that is taking over.

4. A Willingness to Seek Outside Help: An outside opinion on business matters can remove the emotion that tends to creep into decisions revolving around a family business.

See Adriana Gardella, Family Businesses Learn To Adapt to Keep Thriving, The New York Times, Apr. 4, 2012. 

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this to my attention.