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BILL LEE: Your Family Business

Will It Stay in the Family?

After what our industry has endured in recent years, it’s timely to discuss two key elements of survival: a level-headed professional management style and a commitment to increase sales and market share.

Twenty-four years is the average lifespan of a family business in the U.S. About 40% of family-owned businesses make it to the second generation, approximately 13% make it to the third generation and only around 3% ever become fourth generation businesses.

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While these are pretty grim statistics, they should serve as a wake-up call to family-owned companies. The best way I know of how to beat the odds is to begin running your family business more professionally with a solid commitment to growing market share.

The following are suggestions I believe will improve the odds your business will stay in the family.

Family Business Tips

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Tie compensation to equitable versus equal criteria. Conflict flourishes in ambiguity. You will significantly reduce internal conflict by carefully measuring performance.
In a family, the rule is to treat offspring equally, but the rule in a family business is to treat the kids equitably.

Owners who confuse the two in essence encourage the highest achievers to leave the family business for a business environment where their accomplishments are fairly and justly rewarded. Don’t ignore controversial issues. Pentup anger is a breeding ground for conflict. When controversy develops, call a family meeting and get the issues on the table. Most family members will be reasonable when the facts are presented.

“Entrepreneurship” is not necessarily hereditary. Offspring often need more plans, budgets, benchmarks and ratios than past generations needed to guide their decision-making process.

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Insist that each manager prepare a three to five year business plan. It’s best to have a consensus from all stakeholders on where they want the business to go and how fast they want it to get there.

Write clear-cut job descriptions that explain which family member is responsible for what and how the success of each job will be measured. It’s important that all responsibilities are segregated and no-excuses accountability be assigned and accepted. Establish minimum conditions of employment for each job in the business. (See Chapter 21 in my book 30 Ways Managers Shoot Themselves in the Foot. If you don’t own the book, please send me an email at, and I’ll be happy to email that chapter to you.)

Determine if any of your offspring demonstrate the ability and desire to manage the business. If not, consider hiring a professional manager. Don’t kill the golden goose through loyalty to family members. Survival is essential to everyone associated with the business.

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