According to an article in the Harvard Business Review, the family-run business comprise 80 to 90 percent of all business enterprises in North America. Just for a moment, imagine the tremendous impact this must have on our growing economy. My hunch is, if you are reading this, you are most likely a part of a small business that is family-owned and/or operated. Here are some additional statistics you might find interesting…
- Percent of businesses with fewer than 500 employees is 99.7%
- Number of husband and wife teams running companies: 1.2 million
- Percent of family owned businesses that remain in the family into the second generation: 30%
- Percent of family owned businesses that remain in the family into the third generation: 12%
- 78% of all new jobs created are from family businesses
While these numbers are surprising, they really don’t give us a clear picture of the realities of running and sustaining a successful family business. It’s tough out there! But then again, the most rewarding experiences can be the hardest to obtain. Let’s take for example, The Antinori family – they own one of the largest wine companies in the world! This family has had a remarkable success story – spanning 26 generations over a period of 6 centuries since the winery’s inception in 1385. What’s their secret? Perhaps a good business plan, succession planning, solid tax and legal representation, or a combination and some luck mixed in? Before I tell you the answer, let’s look at the top reasons family businesses fail:
- Family Feud or struggle for Power
- Lack of Planning (Financial, Legal, Tax, etc.)
- Treating non-family member employees like family
- Complex Business Decisions & Agreements (new markets or target clients, growth, products & services, exit strategy)
- Communication & Trust
Note: Some 70 percent of family-owned businesses fail or are sold before the second generation gets a chance to take over, according to a 2012 Harvard Business School study.
And the Number 1 Reason Family Businesses Fail is…
Most family businesses fail simply due to a lack of Communication and Trust! The key reason the Antinori family business has survived for so many years, is they’ve been able to trust and communicate with each other. Unless you are successful at this – the core foundation of any organization, success and longevity become much harder, if not impossible to achieve.
I invite you to share your own family business experiences via our blog, and how they impact the dynamics between family members, employees and the business. What works well? Where do you struggle? How have you defined success for you, your company, your family?
At NyeCo, we have developed a comprehensive program designed specifically for family owned and operated companies, who have the desire to be the best at what they do. We provide a solution-based framework for the family business stakeholders to discover, evaluate, explore, plan and implement a long-term strategy to grow and sustain the business. We look at basic foundational keys like; communication and trust, vision alignment, individual family member career goals, family values, and how these building blocks impact/support the long-term strategy of the organization.