Naperville Small Business Attorney Discusses Potential Family Business Hazards
Throughout 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.