Guiding a Multigenerational Family Business

Building a successful family business is a major achievement.

Navigating the complex personal and professional dynamics to grow and scale that business is even more impressive.

But for many family businesses, sustaining that success across generations is nearly impossible.

According to the Family Business Association, only about 30% of family businesses successfully transition to the second generation. That number plummets to 12% for the third generation and 3% for the fourth.

And while every family is different, the reasons that family businesses don’t survive are often the same: a faith that goodwill and momentum are more powerful than nuts-and-bolts business planning.

To ensure your business thrives well into the future, these three items should be on the agenda at your next company meeting, whether it’s in a boardroom or around the dinner table.

1. Establish a Mission Statement.

Money is not enough to keep a family business together.

In fact, a profitable family business can often expose the differing attitudes about work and money that all families struggle with: risk tolerance, who gets to be in charge of what, work-life balance, and how much professional and financial support to give adult children as they’re starting out.

Like any other successful business, your family’s business should have a mission beyond money. Root that mission in the values that bond you all together.

Ask yourselves:

• What do we stand for?
• What are the principles that guide us through major decisions?
• What kind of workplace culture is important to us?
• How do we want to impact the lives of our customers, our employees, and our wider community?
• Why did Grandma or Grandpa found this company in the first place? How would they want us to continue their legacy?

Putting this mission statement together could be a powerful bonding experience for family stakeholders. And when you’re done, you’ll have more than just words for a poster. You’ll have a document that can guide your company through the inevitable ups and downs, from one generation to the next.

2. Define Governance and Hire Top Talent.

As your family business grew, multiple family members may have worn multiple hats. You may have also taken an “all hands on deck” approach to tackling the problems of the day.

But at businesses that last, workers can focus on what they do best, and there’s a clearly defined – and legally durable – power structure, from a board to a CEO on down through the rest of the company. If you don’t have this formal governance structure, the governance of your company could start to resemble an unruly holiday party: high emotions and complicated relationships running everyone ragged.

As you’re filling in seats on your org chart, remember another hallmark of great companies: they hire great people. If the absolute best person for a job isn’t related to you, that might be a good thing – even if that job is in the c-suite. An established pro can help mentor family members as they work their way up. Non-family members can also offer a valuable outside perspective on what’s best for the business at those moments when running the business can’t help but get a little personal for the owners.

3. Be Stewards.

Part of that governance structure should also include a succession plan that’s rooted not in ownership but in stewardship. The major stakeholders in the family business need to be mindful that they’re not going to run the company forever. And the ultimate goal isn’t to maximize profits this quarter – it’s to pass on a healthy, growing, and sustainable company to the next generation.

We understand that your family business isn’t just where you work. It’s part of your legacy. Let’s meet to discuss how our Life-Centered Financial Planning process can help you keep your business thriving and your family’s legacy growing.

Investment advisory services are offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser. Insurance products and services are offered and sold through Kingsview Insurance Services, LLC (“KIS”), by individually licensed and appointed insurance agents. KWM and KIS are subsidiaries of Kingsview Partners.