Everybody loves the Mom & Pop business. The company that’s been in business for decades, being handed down from generation to generation. But how do they do it? How do those small companies stay in business year after year, maintaining their edge among the big guys? What are the unique challenges and successes facing these organizations?
Craig Bethel, Wealth Strategist & Managing Director at US Trust, was a guest on the Industrial Executive Podcast, talking about the biggest issues facing family owned businesses, and what those same companies are doing to be successful.
The family owned business is the most dominant form of business in the United States. 90% of US companies are owned or controlled by a family.
Only 30% of those survive into a second generation. 12% survive into the third generation, and only 3% operate into the fourth generation and beyond.
Biggest Issues Facing Family Owned Businesses
According to a study by Bank of America, family owned businesses face a unique set of challenges, boiling down to 5 issues.
1. Establishing & fostering company values, culture, & relationships.
As you move from generation to generation, establishing and maintaining a company culture can be difficult. A lot of companies struggle to ensure that the new generations live by the same values as those that founded the organization.
“ Culture is crucial in any environment, whether it’s in succession, or selling.” - Craig Bethel
2. Identifying conversations for business leaders to have with next generations.
Much like culture, keeping the next generation in mind when it comes to business development is crucial.
3. Seeking new perspectives.
While the founders may have had a specific vision, it can be important to continue to seek out new perspectives when it comes to pushing the company forward to the next generations.
4. Supporting growing and changing across all areas of the business to help with innovation.
Change is never easy, but if you’re going to survive, your organization needs to commit to investing in growth and change to help align your business to the shifting tides of the market.
5. Achieving innovation for long term success.
How does a company continue innovating? What does it look like to continue pushing the envelope in order to stay relevant?
So in light of the struggles faced, what makes the family owned business successful? What can they do to ensure that they’re around for generations to come?
1. People first.
Everybody talks about putting people first, but the companies that succeed are committed to spotting and harnessing great talent within and outside the family.
2. Develop the next generation.
Companies that last through the generations develop that next line of leaders in a thoughtful and robust manner. They assume the responsibility that is thrust on them.
Communication is key. When people are communicating expectations responsibilities, culture, and vision, those future generations are set up for success.
4. Being innovative.
We live in a highly dynamic and changing business environment. Thankfully, one of the advantages of being a smaller company is the ability to change scope and direction quickly.
“One of the key advantages of a smaller business is the ability to quickly change direction and shift priorities.” - Craig Bethel
5. Building & sharing the wealth.
Make sure that the family wealth doesn’t just remain concentrated at the top. It should be effectively earned and passed on to succeeding generations so that they know they have some skin in the game.
As you navigate the tough waters of business, it can be difficult to maintain a level head. How does your small company stay even with the big dogs? With a few carefully implemented steps, you can ensure that your organization stays innovative for generations to come.
Topics: Industrial Executive