Do You Own or Manage Your Business With Family Members? Here Are 3 Essential Tips to Create Value Together. How family entrepreneurship can create value across generations by drawing on a family's strengths to advance their business goals.
By Lauri Union Edited by Chelsea Brown
Key Takeaways
- The success of a family business doesn't solely rely on following the footsteps of predecessors. Instead, individuals should find their own unique approaches, leveraging their strengths and interests to drive innovation and growth.
- Harness the collective strengths of family members to adapt and thrive in evolving market landscapes.
- Combining the wisdom of older generations with the fresh perspectives of younger members can lead to innovative solutions and sustainable success.
Opinions expressed by Entrepreneur contributors are their own.
Family businesses drive a substantial amount of economic activity. A recent Global Entrepreneurship Monitor report found that across 48 economies, "75% of entrepreneurs and 81% of established business owners co-own and/or co-manage their businesses with family members."
I am the former president of my family's small company and the founding executive director of the Bertarelli Institute for Family Entrepreneurship at Babson College. The most important thing I stress to students is that I'm not trying to prepare them to join the family business. That may be the right option for some, but it's not the only option.
Instead, I try to prepare students to create value across generations by drawing on their family's strengths, a perspective I call family entrepreneurship. The choice isn't a binary between "Do things exactly how my family has been doing them," and "Leave the family business entirely."
From launching a startup in an adjacent industry to revamping the existing business, families fare best when each member taps into their interests and talents.
Related: 7 Best Practices to Running a Healthy Family Business
Tip 1: Don't necessarily follow in your family's footsteps
When I was 27, I succeeded my mom as president of our family's small business manufacturing steel building products. We were losing money. Our sales were down. My mom and I worked to transform our commodity product business into one that sold those products but differentiated ourselves with innovative and valuable customer service.
Ultimately, we grew 12x over 14 years and eventually sold the company. Our legacy as a family wasn't this business. It is the entrepreneurial spirit we bring to everything we do. I learned that the best way to advance my family's goals wasn't necessarily to keep doing the same thing.
A few years ago, a former student whose father co-founded a global family apparel manufacturing company spoke of the pressure he felt to live up to that legacy. "How can I follow in your footsteps?" the student asked his dad. The dad replied: "I don't want you to. I want you to find your own shoes."
A family's source of strength — like the instinct to preserve a way of doing things that has worked for generations — can become a liability when it overreaches into a rejection of new paths or when a well-intentioned effort to pass along a business becomes an imposition young people want to escape. This dad's advice reveals a better path.
"Find your own shoes" should be the motto for every family business navigating the delicate task of intergenerational continuity. No one benefits from a stale business where family employees feel like they must work there. Everyone benefits when people can explore their interests, whether they do so within the existing family business, outside of it, or something in between.
Tip 2: Take advantage of individual and collective strengths
Families should stop asking, "How do I preserve the success of my existing business?" and instead ask, "How can we draw on our individual and collective strengths to create value across multiple domains?"
One of the biggest assets a family business has is a close connection to the next generation, who have a finger on the pulse of where the world is heading. Combining this intuition about change with the older generation's existing knowledge can be powerful — something I saw firsthand when my mom and I transformed our legacy steel business and boosted our family's entrepreneurial activities.
A case study I co-wrote followed Diunsa, a Honduran family-run department store chain. When the pandemic began and stores closed, Diunsa had no online sales infrastructure. The Faraj siblings, all in their 20s, stepped up. The older generation followed their lead, and the siblings launched a website, pick and pack operation, and customer service support within three weeks.
Outside the business, a shift to a family entrepreneurship framework recognizes that a family member's success contributes to the family's legacy, no matter where or how it's achieved — and that it's easier to attain this success when every person pursues opportunities aligned with their interests and talents.
Many forms of family entrepreneurship fall between working within the business and outside of it. Some family members may leave to work in another industry or company and return to the family business later, armed with a wealth of insights. Other family members may launch a startup in an adjacent industry.
Brothers Jack and Max Barber started a food truck business while Jack was in college and Max was in high school. Their mom came from a bakery business. Their dad was the successor to the Barber Foods stuffed-chicken breast empire founded by Grandfather Gus. Jack and Max's company, Mainely Burgers, grew to operate several food trucks and restaurants. Research by Dr. Larissa Leitner indicates that the strength of existing family connections can help new ventures to succeed.
Related: How to Sustain a Family Business Across Generations
Tip 3: Start with understanding and communication
Family ties can be the engine of economic growth. They also pose challenges when relationships don't function well, which can happen often in families.
Understanding and communication are especially important for families. It's impossible for different generations to work together if the older generation feels like their hard-earned wisdom isn't being heard and the younger generation feels like their elders don't get it. It's difficult to forge your own path if you're made to feel like you're abandoning your family.
So, if you're one of the many people who runs or is part of a family business, start by having conversations with your family. Ask "What do you want? What can I do to help?" and begin to imagine together what the future can look like.
Whatever you share or hear, remember that your goal isn't necessarily to preserve what exists. A family business is not a fossil frozen in time to be passed along. It is, like family itself, complicated and always changing.
Amid this shifting complexity, it's helpful to keep in mind the two main ideas of family entrepreneurship: First, find your own shoes. Second, create value, together.
Related: This Family Business Innovates to Grow From Generation to Generation
