While public corporations attract more media attention, family businesses also make a major impact on the U.S. and world economies. Family firms comprise more than half of all U.S. companies and generate at least 50 percent of the nation’s gross domestic product, according to the Harvard Business School. And two-thirds of businesses around the world are family-owned, The Family Firm Institute reports.
The flip side: About 70 percent of family-owned businesses in the U.S. and worldwide fail, or are sold, before the second generation can assume ownership. And only 10-15 percent make it to generation three.
Family businesses that do survive are the ones willing to keep an eye on new horizons. Being open to change and innovation is one key to keeping a business relevant and successful throughout generations. Just because a business model or product has worked in the past doesn’t mean it will continue to do so. Stagnancy or struggle provide an opportunity to negotiate a different path. Family businesses need to confront market realities and consider disruptive new things in order to move forward.
Here are four ways that family businesses can survive and grow from generation to generation.
A big challenge for family businesses is making sure everyone from different generations is heard. Sometimes the creativity and innovation of the newest generation is all that stands between success and failure.
Build on your core
The core elements of running a family business—how to evaluate a balance sheet, review a marketing plan, and initiate an advertising process—should be grasped by multiple family members in order to build a solid structure. You need to have that core knowledge that can be carried from one family business and generation to another. And re-educating yourself and others is an invaluable quality to growing the family business.
Embrace and engineer change
Change in the demand for products or services is inevitable to most any family business. There are no limits to reinventing yourself or your family business. Our family embraced change by investing in and developing our businesses. For example, we moved from land cultivation to engineering over multiple generations.
Carry strong values forward
Good values sustain family businesses because they can be constant and recognizable to customers, no matter the amount of change in the marketplace. You can’t live trying to fill the footsteps of those who went before you. All you can do is live the values your parents taught and what the business was founded upon, teach them and continue them while seeking to move ahead.
When a family business grows it is because the family members aren’t looking at it as a cow to milk, but as a whole farm that they can work together.
Raméz Baassiri, author of Interrupted Entrepreneurship: Embracing Change in the Family Business (www.ramezbaassiri.com), is a board member of a multinational, multigenerational family business.