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I began working with business families in the late 1990s with RSM McGladrey in its family business consulting practice. I was working on my doctoral degree and hoped to gain experience working with leadership development in the “real” world. Then, as my journey continued, I worked with business advisor Tom Hubler of Hubler for Business Families. Tom is the godfather when it comes to working with family businesses, and I learned a lot from him as it pertains to life, families and business families.
Stories of defeat and triumph
I think the biggest surprise to me while working with many entrepreneurs and business owners is the number of times they have failed. Now, please realize that I am not saying these individuals were or are failures. Far from it! But for whatever reason, I had assumed these individuals hit home runs immediately, and I learned this was often not the case. My big takeaway was understanding the grit and determination these individual entrepreneurs possessed that enabled them to get back on the horse and continue with their journeys. The stories they shared with me about their struggles were and still are inspiring.
I don’t watch reality television shows, but I know they are quite popular. As a college professor, I often tell my students that the stories of entrepreneurs and businesspeople are what the younger generation needs to be exposed to. These are stories of defeats and triumphs that are personal, beautiful and true!
No silver spoons or platters
Another surprise I had when I began working with business families concerns a belief that I, like many people, had—that adult children of business families usually have a silver spoon handed to them. But over time, as I was exposed to and worked with many business families, I actually began to wonder why a family member would ever want to work for the family business. Why? Because in my experience adult children work long, hard hours to be successful.
The reality is that many of these dedicated entrepreneurs, who have worked hard to achieve their personal success within the family business, also have to cope with the emotional distress of knowing that many believe they’ve had everything handed to them on a silver platter. I do not want to imply that their fellow coworkers believe this, but I do think the general public holds this view.
Value of succession planning
Do you think that family-owned and managed businesses are important to the U.S. economy? Are you sitting down? (I’m smiling now as I type this.) Did you know that 54% of the U.S. gross domestic product (GDP) is attributed to family-owned and managed businesses? Additionally, 78% of new jobs created in the U.S. come from family-owned and managed businesses, and 35% of Fortune 500 companies are family owned or controlled. These statistics come from Family Enterprise USA (FamilyEnterpriseUSA.com), and they are significant. While publicly traded companies are obviously important to the economy, family-owned and managed businesses are just as important, and it is something that many people do not recognize.
The succession side of the business is also worth contemplating. Approximately 30% of family-owned and managed businesses survive to the second generation. Of those, about 12% make it to the third generation. Engaging in a succession plan is not necessarily an easy task for all stakeholders. There is a lot of heavy lifting involved, but naturally it is doable and very rewarding when a successful vision and plan are created.
In numerous conversations over the years, nearly everyone I’ve spoken with who aspires to have their own business has the dream of retiring in their 40s or 50s and then riding out the rest of their days steeped in luxury and adventure. However, in my experience working with entrepreneurs, it’s actually not until around age 70 that business owners are finally prepared to set the gears in motion and start a conversation about transitioning the business.
Transitions aren’t easy
You might think that transitioning the business is a simple process. For those of us not in a family business, it’s easy to think that an owner just “moves on.” But in reality, this process can feel like giving up one of your children. If you have raised children during times of significant stress, doubt, fear, anger and uncertainty, you may have momentarily been tempted to give up your child (I said momentarily!). But of course, you’re not serious. Transitioning a family business is, in some ways, similar. The difference is that you really do have to give up your “child.”
Now, I sincerely believe that children are more important than a business, but I am attempting to convey the emotional angst and depth of feeling that owners feel toward their family businesses. For them, a business really does feel like a family member, and the thought of giving such a family member away is unimaginable. On some level, giving up the emotions, time, journey, joys, fears, dreams, aspirations and energy invested in the business just seems overwhelming. This is why an entrepreneur needs to be ready and willing to start this conversation earlier rather than later; this can be a lengthy process. And it’s also why engaging an outside consultant with no emotional ties to the family or business is so important.
Work with a professional
Family business advisors are invited into the family, which is both exciting and intimidating. They are given access to personal and deeply moving stories and experiences. Often, some of these stories are also new to the adult children and their spouses in the family. Generally, the business attorney and accountant know these stories, but often the family members do not. Engaging a consultant is an important part of a successful business transition that acknowledges and respects the interests of all stakeholders.
If you are a business owner, is it time to reflect on the next steps in your own business transition? Is it time to set the gears in motion, consult a professional and start your own succession planning? Successful planning allows you to relax, exhale and understand that you grew your business into a beautiful enterprise, and the opportunities for you going forward will have meaning and purpose as well.
Bob Gazich is a visiting assistant professor in global business leadership at the College of St. Benedict and St. John’s University in Minnesota. Along with his academic pursuits, he is a partner with Kingshuk Mukherjee at Global Impex USA, a mill-direct supplier of textiles based in St. Cloud, Minn.
SIDEBAR: U.S. family-owned business facts
From “The Family Business—Successes and Obstacles”
- Family-owned businesses employ 60% of the U.S. workforce and create 78% of all new jobs.
- Family businesses generate 64% of America’s gross domestic product (GDP).
- 1.2 million family-owned small businesses are run by married couples.
- 30% of family businesses survive the transition from first to second-generation ownership.
- 12% survive the transition from second to third generation.
- Only 13% of family businesses remain in the family more than 60 years.
- 47% of family business owners expecting to retire in five years DO NOT have a successor.
Source: score.org