Sunset beach family

There is an old Chinese proverb that says “wealth does not pass three generations”. This would appear to be backed up by a fact from Forbes magazine, which says only 10% of family businesses pass to the grandchildren’s generation. With only a small portion of these businesses surviving over the decades, it begs the question: what is this small percentage doing right that allows for their continued longevity? What are they doing differently to the businesses that fall by the wayside?

Below are five factors that are key to keeping a family business robust and prosperous for both today and in the years to come.

Talking helps

In every family, people will occasionally fall out and stop talking to each other. In a regular family, this might lead to a few frosty dinners, but in a family business the results can be catastrophic. If communication breaks down, it can lead to any number of problems down the line, many of which can be fatal — especially to a mid-sized or smaller business.

To make sure this doesn’t happen, you need to leave emotional baggage at the office door and look at things clearly. Regular meetings can ensure that potential conflicts are resolved amicably, and keep clear lines of communication between family members so that everyone remains on the same page.

KPMG gives some effective advice about improving your business’s communication as well as some great tips on reducing conflict and enhancing decision-making.

Family succession

Having a succession plan is an incredibly important part of keeping your business going into the future. A pre-agreed plan of action can prevent disputes about entitlement and ownership in the years to come.

The first step in your plan should be to identify the most suitable candidates to continue the leadership of the company. This should include plans for both ownership and department management.

You should ensure that all family members are clear as to what roles they will assume when the time comes to hand over the business, eliminating any potential confusion. It should also be clear what support is expected to be given to the successor of the business.

PWC has an excellent guide to putting together your succession or transition plan, complete with case studies and downloadable resources.

Shared family values and goals

The only way a boat will move forward is if everyone is rowing in the same direction. It might sound obvious, but making sure that everyone in your family shares the same values and goals is an essential part of pushing your business in the right direction.

You should put in place a shared vision for the company, allowing members of your family to contribute ideas. This can form the foundation upon which you can lay down all of the future plans for the business. Identifying what your company does well and how it can continue to grow without losing touch with its values can help solidify your vision, while also reassuring potential customers they will be doing business with someone who cares.

Rix Petroleum is an excellent example of a family firm that has been consistently successful in the fuel distribution industry for over 140 years (5 generations). They also have a clear set of values within their company vision that have allowed them to thrive, showing how you can preserve the essence of your company while continuing to grow.

Don’t be afraid to go outside

Not everything that your business does has to be done behind closed doors. Fostering a tribal mentally within your family can bring a sense of unity and togetherness within the company, but it can also shut you off from any great ideas that might be available externally.

Being open-minded about seeking help or advice from outside your business can provide you with a new perspective or suggestions that you would not have come up with had you remained in-house. Working with other companies or being willing to appoint people from outside can also keep family staff on their toes while also helping to forge better working relations. Hiring executives from outside the fold can also improve the governance of your company.

By James Brook, Marketing Manager at Rix