In a recent edition of the Daily Herald\u2019s Business Ledger, the focus was on family businesses.\u00a0 More specifically, the focus was on succession planning so that the business could remain in the family and continue to benefit family members for many generations.\u00a0 One of the stories discussed Klein Tools, a business that has been in the Klein family for six generations.\u00a0 I myself am the product of a successful family business.\u00a0 My grandfather, Sam Dean Sr., founded Dean Milk Company (now Dean Foods) in 1927.\u00a0 Members of the Dean family would remain in the management of that company for the next 75 years.\u00a0 So family businesses can be successful, and when they are, their stories can be both inspiring and heart-warming.\u00a0 Unfortunately, those kinds of family success stories are few and far between.\u00a0 In fact, most family businesses don\u2019t survive through a third generation.\u00a0 So if you\u2019ve got a romantic notion about passing your company on to your kids, grandkids, great grandkids, and beyond, you might want to revisit that notion.\u00a0 It\u2019s a lot tougher than you might think.\u00a0 For more on this, please read below.<\/p>\n
Thinking of starting a family business?\u00a0 Better think twice.<\/strong><\/p>\n A family business can be a positive thing . . . the thread that binds the family together.\u00a0 It can keep the family focused on a common activity and a common source of wealth.\u00a0 But in many cases, it\u2019s just the opposite.\u00a0 It can become a divisive force, full of strife and contention that drives family members into separate warring camps.\u00a0 Consider a few case histories.<\/p>\n Case History #1<\/strong>.\u00a0 A father and son are at odds over the family business.\u00a0 The plan has always been for the son to take over the business \u201csomeday,\u201d but in the son\u2019s view, that day shows no sign of arriving anytime soon.\u00a0 \u201cTimes have changed, but my dad has his head in the sand and won\u2019t face the challenges in front of us.\u00a0 He\u2019s never going to retire.\u00a0 He\u2019s going to stick around to make sure we continue to do things his way and to make sure I don\u2019t have a chance to make any changes.\u201d\u00a0 But from his father\u2019s point of view, \u201cMy son needs more seasoning before he\u2019s ready to run things without me.\u00a0 He\u2019s immature and reckless.\u00a0 He wants to fix things that aren\u2019t broken . . . take unnecessary risks.\u00a0 This is my company and I\u2019ll decide when he\u2019s ready to take over.\u201d Case History #2<\/strong>.\u00a0 Two siblings, a brother and a sister, are working in the business.\u00a0 The brother is older than his sister, has worked in the business longer than his sister, and believes he should be the heir apparent.\u00a0 However, by any objective measure, the sister would be the obvious choice.\u00a0 She\u2019s smarter, has significantly higher emotional intelligence, and has shown much better leadership skills than her brother.\u00a0 So what should the family do?\u00a0 If they give the brother a shot at the top spot, they risk the health and welfare of the business.\u00a0 If they promote the sister over her brother, they risk alienating her brother and his wife and kids from the rest of the family.\u00a0 Either way, Thanksgiving dinners aren\u2019t going to be a lot of laughs anymore.<\/p>\n Case History #3<\/strong>.\u00a0 We\u2019ve got a number of family members in the business who consider their jobs to be entitlements.\u00a0 We\u2019re paying them more than they could earn anyplace else because, afterall, they are \u201cfamily.\u201d\u00a0 And no one has the stomach to fire them because they all have dependents who count on them for a paycheck.\u00a0 Besides, firing family members would wreak all sorts of havoc with extended family members who would demand to know how we could possibly fire good ol\u2019 Uncle Charlie.<\/p>\n And these are just the sticky relationship issues that family businesses may encounter.\u00a0 We haven\u2019t even touched on the financial ramifications of a family business such as how stock is distributed, when and how dividends will be paid, etc.<\/p>\n There are two take-aways from this.<\/p>\n First, don\u2019t be seduced by the romantic notion of a family business.\u00a0 Yes, it could turn out very successfully as it did for the Kleins and the Deans and scores of other high-profile family businesses.\u00a0 But it could also go the other way.\u00a0 There\u2019s no getting around it, a family business puts family relationships at risk, so if you\u2019re going to commit to building a family business, you have to acknowledge and accept that risk.<\/p>\n Second, recognize that there are costs associated with a commitment to a family business.\u00a0 To give your family a fair shot at success, you\u2019ll need the help of financial and legal advisors who are experienced with family businesses and can help you avoid the financial, organizational, and succession planning pitfalls that await you.\u00a0 These, of course, are costs in dollars, but there will also be a significant cost to you in terms of your time.<\/p>\n Consider carefully if building a family business is the right decision for you, and if it is, commit the time and resources to do it right.<\/p>\n","protected":false},"excerpt":{"rendered":" In a recent edition of the Daily Herald\u2019s Business Ledger, the focus was on family businesses.\u00a0 More specifically, the focus was on succession planning so that the business could remain in the family and continue to benefit family members for many generations.\u00a0 One of the stories discussed Klein Tools, a business that has been in<\/p>\n
\nThe tension at work is palpable.\u00a0 The father and son communicate by texting or email, but they rarely speak.\u00a0 Employees are choosing up sides, trying to decide which camp they should be in.\u00a0 Too bad for this family.\u00a0 Although it wasn\u2019t their intention, they traded what had been a good father\/son relationship for a rancorous business relationship.<\/p>\n