Family Business
and the American Economy
Tom Luby, Business Consultant and Fence Industry Spokesperson
90 PERCENT
ABOUT OF ALL U.S. BUSINESSES ARE FAMILY OWNED OR CONTROLLED. THEY RANGE IN SIZE FROM THE TRADITIONAL SMALL BUSINESS TO A THIRD OF THE FORTUNE 500 FIRMS. IT IS ESTIMATED THAT FAMILY BUSINESSES GENERATE ABOUT HALF OF THE COUNTRY’S GROSS NATIONAL PRODUCT (GNP) AND HALF OF THE TOTAL WAGES PAID. The American economy depends heavily on the continuity and success of the family business, and yet, less than one-third of them survive the transition from first to second generation ownership. Of those that do, about half do not survive the transition from second to third generation ownership. At any given time, 40 percent of U.S. businesses are facing the transfer of ownership issue. Founders are trying to decide what to do with their businesses, including: • Close the doors • Sell to an outsider or employee • Retain ownership but hire outside management • Retain family ownership and management control 56
MARCH 2022 | FENCE NEWS USA
There are four basic reasons why family firms fail to transfer the business from generation to generation successfully, they are: • Lack of viability of the business • Lack of planning • Little desire on the owner’s part to transfer the firm • Reluctance of offspring to join the firm, or if they do, failing to work effectively as an employee/owner The primary cause is lack of planning. With the right plans in place, the business will remain healthy, in most cases. There are four plans that make up the transition process. By implementing these plans, you will virtually ensure the successful transfer of
your business within the family hierarchy. A strategic plan for the business will allow each generation an opportunity to chart a course for the firm. Setting business goals as a family will ensure that everyone has a clear picture of the company’s future. The family strategic plan is needed to maintain a healthy, viable business. This plan establishes policies for the family’s role in the business. For example, it may include an entry and exit policy that outlines the criteria for working in the business. It should include the mission statement that spells out your family’s values and basic policies for the business. By implementing this plan, you may avoid later conflicts about
