FAMILYMATTERS
Survival of the fittest Here’s how to beat the odds and get your family business to grow
By Wayne Rivers
A
ccording to Verne Harnish’s book Scaling Up, there are about 28 million business firms in America. Of those, only about 4 percent, or 1.12 million, make it to the $1 million sales level. From there, only about 10 percent of that number, or 112,000, make it to the $10 million sales threshold. And only about 17,000 companies make it to the $50 million sales level—that’s .001 of all U.S. businesses and includes the roughly 5000 public companies! While we don’t know the source of his figures, they do roughly approximate Dun & Bradstreet which says that less than 1 percent of the private businesses in America ever make it to $20 million of revenue. For the purposes of this column, let’s stipulate that, unless there are extraordinary circumstances, 96 percent of the business firms in America are not sustainable. Either they are lifestyle businesses, small professional services companies, homebased businesses, mom-and-pop stores, or there was never any intention to grow the business to a sustainable level in the first place. Now, focusing on the 4 percent which are greater than $1 million in annual turnover, what are the barriers to growth and sustainability? There are a few big hurdles they have to get over to survive: No shared vision. First-generation family businesses have a great advantage; common vision is easy to achieve when there’s only one visionary! If a founder’s home furnishings store becomes successful, and others join him in his quest, things get a little more complicated. He must learn to share the vision and hire and train people whose personal beliefs are consistent with his. As the family grows and moves into the second and third generations, the need for common vision and ever-improving communication becomes paramount.
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NOVEMBER/DECEMBER | 2016
If Sister A wants to double the size of the business over the next 10 years, and Brother B clings tenaciously to today’s status quo… well, you can see the inherent conflict between the two visions. If ownership consists of mom, dad, and their three children, and management consists of dad, one of the three children, and three key non-family managers, it’s apparent that the opportunity for competing or conflicting visions grows exponentially. While it sounds very consultant-centric to rail on about the importance of a common vision, it’s not! Lack of a compelling common vision sets up both family members and business participants for unending conflict. And leaders in conflict are rarely, if ever, achieving their full potentials much less maximizing their quality of life. Leadership. It’s quite common in family businesses to have an individual leader or a small leadership team made up of supermen or superwomen. That is to say they have unquenchable thirsts for hard labor and live to work rather than working to live. Usually more business generalists than specialists, they can delve into virtually any aspect of the enterprise and acquit themselves quite well; there seems to be nothing they can’t do. Having supermen and superwomen on the team is quite a blessing; however, the growth and sustainability barrier is that it’s unrealistic to assume the next generation of business leaders will also be super. NextGen leaders are much more likely to specialize and to, therefore, surround themselves with other specialists who can support them. A second leadership barrier is that, at some point in the growth of the family-owned business, leaders are faced with a lack of knowledge of what it’s like to be big (and bigger still!). The default behavior is to emulate previous generations of leaders who were, let’s face it, running companies that were smaller and much less complex. Once the company surpasses a certain point, all land-
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