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You have probably read or heard about traditional old-money families that have built a lasting family business. They have kept their family’s wealth, fortune, and influence alive despite the passage of time. Yet, for every old-money family there are thousands of nouveau riche in which the wealth did not survive beyond the second generation.
A report from the Family Business Institute shows that only 30% of family businesses survive into the second generation and only 12% of family businesses survive beyond the third generation. However, building a lasting business legacy, though hard, is not impossible. The piece provides insight into 3 tips that can help you build the legacy of a lasting family business.
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Create a Company Culture Beyond Money
Your business should be profitable. You have no business doing business if you can’t book profits. However, if you want to build a lasting family business—one that will outlast you—you’ll need to build a company culture that transcends money.
Family members working in your business as well as your employees must believe in something greater than themselves. Whether that something is family pride, the drive to make the world a better place, or something even larger, their belief in it should affect their efforts on the job. Everyone who works in the company, whether they are family or not, should know they are contributing toward that greater goal.
You also need to build a company culture that fosters peace and unity at work and at home. For instance, you may want to start a culture of only discussing work at work and avoiding dealing with work-related issues at home. You may also want to build a culture in which interested family members can only get ownership by sweat or by cash to help them place a higher value on their stake in the company.
Prepare the Next Generation
Many people don’t introduce their business to their kids. Then they wonder why their offspring don’t have an interest in taking over the company. Therefore, you’ll need be proactive in your efforts to prepare the next generation. Groom them for stepping up when the time is right. While your children are young, explain to them what your business does. Describe to them its importance to society.
Preparing the next generation also includes providing financial education for your kids to prepare them to make smart financial decisions when they finally do take over the company.
However, in preparing your kids to take over, you’ll need to avoid forcing the business on them. Likewise, you’ll want to avoid forcing them on the business. The ideal way to prepare the next generation is to provide them with the resources and encouragement to pursue their passions. In fact, you should consider letting them work in other establishments before they join your business. In that way, they will build an honest work ethic instead of working in a bubble in your business.
Don’t Sabotage Your Efforts to Build a Legacy
Many business owners often self-sabotage their efforts to build a lasting family business legacy by making some counterproductive moves. If you want to build a family business, it just makes sense to have your kids, your cousins, your nieces and nephews, as well as other members of your extended family work with you. However, you’ll be setting your business up for failure if you base your hiring decisions on DNA instead of on qualifications.
You can create an environment that allows family members to hear about and apply for positions before outsiders do. However, once hired, family members should pull their own weight. They should only be promoted on the strength of their contributions. More importantly, you should treat the “outsiders” working in your business as if they were family members. They will likely surprise you by treating your business like their business.