Naperville Small Business Attorney Discusses Potential Family Business Hazards

family business, family company, Naperville Business Law AttorneyThroughout the business world, there are many stories of family-owned companies that started small and grew to become social and corporate icons. Famous examples include The H.J. Heinz Company, S.C. Johnson, and the Ford Motor Company. However, owning and running a family business can be extremely challenging, and determining appropriate roles within the company for family members is often particularly difficult. Several of my clients recently addressed this very topic with me, so here are few things to keep in mind as you work toward the success of your family business.

An estimated 60 percent of family-owned businesses fail or are liquidated before a second generation takes control of the company. About 13 percent survive into a third generation. Many family businesses often find themselves facing similar issues, leading a large number to a similar fate, if the issues are not handled correctly.

A Family Business is Not a Safety Net

Average tenure for a corporate CEO is about five years, while many family businesses are run by the same individual for several times that length. Although not true in every case, this can lead to issues within the family company as it deals with changes in the business landscape, technological advances, and customer trends.

Additionally, a family business owner may assume that his or her children will be equally qualified and interested in joining the company as he or she was in starting it. Forcing a child, either explicitly or implicitly, to be part of the business often leads to uninterested management and poor leadership. Likewise, promising a child a place in the company “no matter what” can result second-generation family members treating the business as an option of last resort. Assigning leadership positions to family members who are underqualified or just passing through can be ultimately devastating to a company’s future.

Identify Strengths of Next-Generation Family Members

A common problem in family businesses is the expectation that second-generation family members will have similar strengths and tendencies as the previous generation. From a certain standpoint, such an assumption is understandable, as a father who runs the financial or marketing aspect of a company may expect his son to be able to effectively do the same job in the future. However, such specialization can limit the growth potential of family members, and, in turn, the business as a whole.

A successful business owner is able to recognize a variety of abilities and strengths in subsequent generations, and provides cross-training or non-family mentoring in areas needing improvement. While Dad may spent years running the company and balancing numbers from his office, his son or daughter may be better suited for outside sales or effective personnel management.

Get Legal Help from a DuPage County Business Lawyer

At the Gierach Law Firm, we understand that your family and your business are important to you, and that your company may represent your legacy to your children. Let us help you create the best opportunities for success both now and for generations to come. For legal representation in any business matter, contact an experienced Naperville business attorney today. Call 630-756-1160 for an appointment.

Sources:

Smith Family Business Initiative at Cornell University

Harvard Law School

Practice Areas

Archive

+2018

+2017

+2016

+2015

Please note: These blogs have been created over a period of time and laws and information can change. For the most current information on a topic you are interested in please seek proper legal counsel.

Blog Sign Up

 

Like what you see?

Follow us to stay current!

Facebook LinkedIn Twitter Youtube
search

630-756-1160

CONTACT US

Fields marked with a * are required
 
 
 
Napervile-attorne-disclaimer
The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.
 
 

Providing You With

Peace of Mind
Facebook LinkedIn Twitter Youtube BBB
From our offices in Naperville, Illinois, we handle matters throughout Illinois including DuPage, Cook, Will, and Kane counties and within towns such as Addison, Aurora, Barrington, Batavia, Burr Ridge, Carol Stream, Chicago, Darien, Downers Grove, Elgin, Elk Grove Village, Elmhurst, Geneva, Hinsdale, Hoffman Estates, Lisle, Lombard, Naperville, Oak Brook, Roselle, Schaumburg, St. Charles, Warrenville, Wheaton, and Winfield.
association and logos
© 2024 Gierach Law Firm | 
1776 Legacy Circle, Suite 104, Naperville, IL 60563 | 
630-756-1160
OVC INC
Back to Top