If you’re part of a family business, there’s good news and bad news. More than 70 percent of all businesses in the United States are family businesses, generating more than half of the U.S. Gross National Product. However, two out of three don’t survive to the next generation, and with 500,000 new businesses starting each month in the United States, family businesses are replaced at a rapid rate.
How does a family business remain on the plus side of these statistics?
There are a number of sound practices while sustaining a family business, but there’s a big difference between working with your children and lining up your succession plan with your kids in mind. Here are some tips for dealing with the biggest threat to a family business – surviving transition to the next generation.
- Identify your children’s individual strengths. It’s impossible for your son or daughter to think and act exactly like you. If you’re the founder of the business, this may be even more difficult to keep in mind because you started a business from scratch. Your children may not have the same entrepreneurial spirit. That’s perfectly okay, because your business is in a different stage from when you started it. While experience has given you a large bank of knowledge, allow your successor to shine and contribute at their pace. Guide them gently; they will want to do some things their own way. Let them know when they’ve done something exceptional, especially if you wouldn’t have thought of it.
- Expose your children to all aspects of the job. Merchandising, production, management, buying, marketing, financial planning – the list goes on regarding all the things to understand in general management. You may not be an expert in all areas, but you know more than the average employee. To start preparing your children for the top position, they must understand how things work at the bottom. When they’ve spent time in the trenches, they better comprehend operations, and the kind of people they’ll need to employ in the future.
- Stretch your children’s abilities by having them work for another company. The period after graduation is a scary phase of life, but jumping into the family business right away isn’t the best move. Children have an urge to distinguish themselves from their parents, and working for another company is a great way to do so. Let them spread their wings, learn new things and appreciate small victories outside of the business. If and when they choose to work for the family business, they’ll feel better about the decision.
A mentoring relationship toward the next generation is also extremely helpful. It provides a realistic but loving perspective. iBi
Henry Hutcheson is president of Family Business USA (www.familybusinessusa.com) and specializes in helping family and privately held businesses successfully manage transition, maintain harmony and improve operations.