Running a family business can be some of the most rewarding work in the world. In many ways, building a successful business that can be passed down the branches of your family tree is seen as the American Dream.
Unfortunately, it doesn’t always work out that way. Only 30 percent of these businesses survive into the second generation and a mere 12 percent make it to the third.
While there's no one secret to longevity, there are some things business owners can do to ensure their business is positioned to thrive. Here, three family-owned businesses share their recipes for success.
1. Give each other space. Jeff Oddo’s grandfather told his son that three stallions kept in the same pen will kill each other. Each stallion must have its own pasture to thrive. Oddo’s father adopted the same mentality for the family business—each of his three sons needed their own company as part of the larger business.
“Siblings should not work for siblings unless that’s really what they want to do,” says Oddo. Today, Jeff is the CEO of building maintenance company City Wide in Kansas City, Kan., founded by his father, while brothers Rick and Brad run their own businesses. However, the father and three sons still meet every week to discuss business. Even when family members are working more directly together, be careful not to micromanage. Establish a structure that allows for supervision and cooperation without meddling or inadvertent power plays.
2. Hold each other accountable. Establishing systems to hold each to certain standards is key to the success of family businesses. “You need to set expectations upfront,” says Stephen Hillenmeyer, owner of Weed Man Lawn Care and Stephen Hillenmeyer Landscape Services in Lexington, Ky. For Hillenmeyer, the family business extends back farther than most: Francis Xavier Hillenmeyer founded the company in 1841, making Stephen the fifth generation to have run the company. However, just because his two sons are preparing to be the sixth generations of owners doesn’t mean they can slack off.
“My sons knew, if they didn’t perform, they would be fired,” says Hillenmeyer. He advises discussing concrete goals and responsibilities. That way, if someone is not performing, the solution can be centered on exact business issues, instead of emotional and personal disagreements.
3. Leave work in the office. “We’re all committed to leaving work at work as best we can,” says Sam Prochazka. For Prochazka, his business is Novosbed, a memory foam mattress company, and his co-workers are his siblings. Prochazka co-founded the company in Edmonton, Alta. with his brother Andy in 2004. Then, the Prochazkas went all in when their sister Helenka joined the business to run the product and retail aspects.
Sometimes it is hard—almost impossible—to leave work in the office when your coworkers are your family, especially when the company is struggling. However, the division is important. When you’re with your family after hours, make a promise not to talk shop. In the end, family ties need to be maintained just like business connections.
4. And leave home at home. “I can have a conversation with a sibling and instantly be triggered back to when we were teenagers, and fighting over stupid stuff,” says Oddo. “These emotional memories are almost hardwired through years of relationships can create some challenges that you wouldn’t have with someone else.” In any business, there’s bound to be disagreements. However, with families, you’ve been arguing for decades. Never bring up personal arguments in the context of business disagreements. In other words, the fact that your sister crashed your car in tenth grade should never come up when discussing why you feel online marketing has been lagging.
5. Check for blind spots. “With families, there can be blind spots,” says Prochazka. If everyone running the company has similar attitudes, values and loyalties, potential problems may be missed. Make sure you have individuals in your company who can offer valuable outside perspective.
6. Open the lines of communication. Hillenmeyer, who used to run his landscape services company with his two brothers, now drills the importance of communication into the minds of his two sons entering the business. “You cannot communicate enough and you cannot have clear enough expectations,” he says. It’s better to have hard conversations than to allow problems to grow and resentment to build. Establish routines, such as weekly meetings, to openly discuss problems and progress, preventing business issues from becoming familial baggage.
7. Be realistic about your job responsibilities. A hard truth for family patriarchs and matriarchs is that not every child is going to be CEO material. “Understand your strengths and weaknesses through a tool like C.I. [Culture Index] that can tell you what your role should be,” says Oddo. “You can still own the company, but unless you have the skills of a successful CEO, hire someone to do that for you.”
Family businesses can draw strength from recognizing that not every child should be CEO. Critically examine each member's strengths and weaknesses and build from there. Hillenmeyer believes that his sons’ differences allow them to work better together. “They complement each other,” says Hillenmeyer. Prochazka has come to the same conclusion. While at a different company, he and his brother overlapped in their roles leading the business, they have now have separate positions that suit their abilities to a greater degree. “Our roles come naturally,” says Prochazka.
8. Realize it’s not for everyone. “If there’s any tension before starting a business, don’t do it,” says Prochazka. That goes for the next generation as well. “With our daughters, I never raised them how I was raised [with the assumption they’d join the family business,]” says Oddo, who has written a book on the principles of parenting. “I talk to them a lot about find their passion.” Pushing family members to work in the company in roles they aren’t suited for will only lead to problems, both for the business and after hours.
9. Embrace the strengths of family. While family and business relationships can be difficult to navigate, it is more than worth it for the families that find success in the field. Families share values, trust each other and have each other’s backs in a way few traditional businesses understand. “At the end of the day, when everything is working the way that it should, there is nothing greater than the sense of accomplishment in watching your family succeed,” says Hillenmeyer.