As someone who routinely interviews small business owners, I often talk with people who work with a family business. That’s no coincidence, since according to Family Enterprise USA (FEUSA), a national advocacy group for business-owning families, there are 5.5 million family businesses in this country.
FEUSA statistics show that family-owned businesses contribute 57 percent – or about $8.3 trillion — of the U.S. gross domestic product and employ nearly 63 percent of the nation’s workforce. Unfortunately, however, less than one third of family businesses survive the transition from first to second generation ownership and another half do not survive the move from second to third generation.
The Delbrook Resources Opportunities Master Fund was up 9.2% for May, bringing its year-to-date return to 33%. Q1 2021 hedge fund letters, conferences and more Dellbrook is an equity long/ short fund that focuses exclusively on the metals and mining sector. It invests mainly in public companies focused on precious, base, energy and industrial metals Read More
The reasons for the transition problems are complicated. Like other businesses, many family firms have taken a hit with the 21st century economy. In addition, some family businesses may not have kept up with the times and may be stuck in the past when the founders decide to retire. Another reason turn-over is tricky is that many young adults today desire more flexibility and freedom in the workplace than their parents’ or grandparents’ businesses may offer.
In their book The Millennials: Connecting to America’s Largest Generation, for instance, authors Thomas Rainer and Jess Rainer report that more than eight out of 10 millennials desire jobs that offer flexibility with scheduling work, and four out of 10 ranked flexibility as an “extremely important” factor in choosing a job.
Pros and Cons to consider before joining your family business
If you are weighing your options about joining the family business, there are some important pros and cons to consider. We’ll look at five possible advantages first.
1. You are carrying on a tradition. You grew up with this business and you know it backwards and forwards. Chances are you have worked with the business in some capacity since you were a kid. You can’t take that kind of experience and knowledge lightly.
By working in the family business and taking it over one day, you have a unique bond with your relatives. It can deepen both your relationships and your roots in your community.
2. You are respected as an authority and are able to perform responsible tasks without having to work your way up. Many second and third generation family business workers have moved right into management positions, with the appropriate responsibilities and salary, right after graduation.
If you’re a woman, this can be especially important. According to the Mass Mutual American Family Business Survey, about 60 percent of all family-owned businesses have women in top management positions. By comparison, of the non-family firms in the Fortune 1000, only 2.5 percent are led by women, according to Fortune magazine.
3. Your opinions are valued. You are able to give your ideas for new business strategies directly to the boss without going through a lot of channels and hoops. You get to work with people who care about you and want what’s best for you.
4. You can have a real stake in the company’s future, both emotionally and financially. The pride you have in working for a firm founded by your family can be motivating, and, when you have the opportunity to improve that business and make decisions that move it safely into the future, it can be very gratifying.
5. You can pass on the business to your own kids, leaving them the same – or an even improved version – of the legacy your parents left you.
Disadvantages of joining the family business
Now here are five possible disadvantages of joining the family business.
1. You can feel trapped. What if you long to march to a different beat in a completely different line of work? For some people, a family business can feel like an obligation rather than an opportunity.
Another way a family business can feel like a dead end is if you have offered ideas for changing or improving a certain aspect of the business that have been turned down or ignored by your family members. In some cases, you may even feel your relationships with family could be better if you got out of the business entirely.
2. You have no opportunity for advancement. Many of the advantages of a family business can go away if an older sibling has a tight handle on the future of the business or if a parent has no plans to retire.
According to the American Family Business survey, about one third of family business owners have no plans to retire, and almost another third report that the owner’s retirement is more than a decade away. These figures show that some younger family members may have a long wait before they are able to put their stamp on the business.
3. You may feel you can never get away from work. Many family business members feel that, in order to hold up their end of the business, they have to be basically on call 24 hours a day. If you complain about the load, you are unlikely to get sympathy from your parent or grandparent. They may, in fact, delight in tell you how many hours they worked when they were your age.
4. You may have a problem forging your own identity. It’s a double-edged sword being the founder’s son or daughter. You may not get the respect you deserve. Some employees may unfairly compare you to your parents without taking the time to get to know how you do things, and still others may resent you, thinking you have it easy or were born with the proverbial spoon in your mouth.
5. Working with family member can be difficult. You all know each other so well, that there can be a tendency to get personal in any areas of conflict. You also may feel pressured to live up to some pre-conceived standard.
So how to make it work? Like any business relationship, good communication is the key. Here are a few tips from those in the trenches for making a family business work well:
- Create and follow job descriptions so that duties are clearly defined.
- Communicate clearly and frequently about any issues that could cause tension between family members.
- Try to separate work and non-work related activities. You don’t have to “talk shop” when you are together outside the office.
- Never air family laundry with other employees. Maintain a respectful, professional work atmosphere.
- Develop other areas of your life so that you have interest and support outside the family business.