Branching Out

Establising The Roots

Even if there's a market opportunity to branch out, says Hoover, family businesses have to be wary about doing so before they've gone through the second stage of their development: the professionalization of the business. "If the business hasn't done this yet--and entrepreneurial family businesses are often resistant--they can wind up replicating management and organizational problems when they expand into other markets. Business problems compound geometrically, not mathematically, when there's an expansion." The complexity of expanding makes it essential to define the structure of the holding company, the responsibilities and methods of accountability of the branch heads, the geographical territories, and the operational connections.

In addition to making certain the business processes are well articulated and understood, family members need to talk about unresolved issues of trust and respect before branching out. "If they are not [addressed], chances are these breaches will only escalate," Hoover says.

Still, there's nothing better for a business than expanding your profit, reach and reputation, and having a large, talented cadre of trusted family members to make that expansion happen. It's good for business and good for the family.

"Can you imagine if we hadn't opened our branches and now we had the three [members] of our generation and nine of the next in one building?" muses Bromberg. "We would have killed each other."

Patricia Schiff Estess writes family business histories and is the author of two books, Managing Alternative Work Arrangements (Crisp Publishing) and Money Advice for Your Successful Remarriage (Betterway Press).

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This article was originally published in the May 1998 print edition of Entrepreneur with the headline: Branching Out.

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