Only 8% of family businesses are still successful after several generations. In this article, I explain what successful family businesses do that the other 92% do not.
Voor Nederlands, klik hier.
The van Tetterode family has been working with stone and glass for five generations. My great-grandfather had a stonemason in Amsterdam at the end of the 19th century.
My grandfather had his own glass factory in Amsterdam. Glass objects were made in the studio on behalf of others, but they also realized their own designs. Grandfather sold his company, and it still exists.
My great-grandfather’s stonemason also exists and is run by the descendants of my grandfather’s brother. My uncle, Floris van Tetterode, started his own studio in Voorthuizen. After the sudden death of my uncle, my aunt managed the company successfully for almost 15 years. After that, she sold it, and unfortunately, it went bankrupt.
The present article is not about the glass factories in my family, but about how you can be successful as a family business.
Cracking the code
The reason behind this blog is an interview on the radio with researcher and economist Maarten de Groot. He discovered that 3 out of 10 family businesses are transferred to the next generation. Only 8% of all family businesses survive several generations. He describes his findings in his Ph.D. thesis “Cracking the Code on Wealth Preservation: It is not about Money”.
The first generation builds the company. They have a great desire to transfer the company to the next generation. The interesting thing is that the second generation is cramped. They are afraid of making the wrong decisions and not doing it right. Often, the third generation wipes out the company’s assets or makes unwise decisions that cause the family business to shut down or, worse, go bankrupt.
How to run a successful family business?
The question is how you can run a successful family business for longer than three generations. Maarten de Groot researched many successful family businesses in the Netherlands and abroad and discovered various success factors.
First, a successful business is generous and philanthropic. It is not that they just give money away, but they consult and decide together which charities are supported. The younger generations are also involved in this. In this way, they get to know each other, they discover how others think, and there is more respect and connection.
A successful family business ensures that mutual (warm) ties are maintained.
The first generation is mainly concerned with itself. The second-generation (the daughters and the sons) do know each other and know which buttons to press to get something done or not. The third generation (cousins) have lost sight of each other because they live further away and have different interests. According to the research, it appears that it is exactly then important to keep the ties warm.
Have family gatherings
Successful families do that by organizing a family gathering once or twice a year. Such a meeting usually lasts a day or two and goes beyond a game of soccer and drinks. During the gathering, there is also a discussion about the company’s results and the intended strategy. It helps to inform each other, to present different options, and to discuss. This can go well if you know each other better, understand each other’s points of view and come to new insights for yourself. After all, it is about how the family makes good decisions.
Create a family newsletter
Furthermore, a successful family business has its own (digital) family newspaper. It shares news about family members who have graduated from school or universities and includes short travel reports. As a result, everyone is aware of who is doing what, which contributes to good family ties.
Maarten de Groot concludes that good family ties ensure a well-run and successful family business. This also means that there is (good) communication, that family members are involved, that boundaries are clear, that expectations are expressed and that there is a plan for the future.
The WHY of a family business
Another reason for a successful family business may be that it is clear to all family members why it exists. Grandpa (or grandma) once started the company because opportunities were seen and taken. No doubt it wasn’t just about being the biggest and the best. Grandpa and Grandma certainly had an idea of somehow making the world a better place and serving others. The question is whether family businesses (and the second and third generation) are aware of this.
As a family business, it helps to have a goal, purpose, or a WHY. That is more than just the core values or mission of the company. The WHY is the company’s unique contribution and its effect on the world. If that is clear, the right decisions can be made by the (younger) family members to succeed. Decisions that are in line with the WHY of the company.
The WHY did not only originate with the entrepreneurial spirit of the founder of the family business. It has also emerged over time with great successes and turning points of the business.
Discover your family business’s WHY
A family business can discover a WHY during a family gathering. Depending on the size of the family, it is good to have about 30 members together. It is an advantage to have the founder present, but it is not necessary. Also, family members must be present who work in the different layers of the company. Next, it might also be helpful to invite a few company employees who are not family members. This way, new insights can come.
The goal is to discover a WHY based on stories and experiences about the family business. Family ties can also be strengthened, and there is more understanding for each other.
Do you want to discover the WHY of a family business? So that there can be better communication? That you can make the right decisions? To have better relationships? So that you and the next generations are more successful?
Please contact me for a meeting by clicking the link below.
What else can a family business do to be more successful and ensure that the next generations are too? Let me know in the comment field below. The other readers of this article. and I are looking forward to reading from you!
Thank you for reading up to here & sharing this article with your colleagues, friends, or family. And please SHARE this article with your network on Twitter, Facebook, and LinkedIn by pressing the buttons below so that they can also benefit from this article about key factors for a successful family business. You are welcome to copy parts of this blog if you state the source.
Have you seen an error in this article? Let me know! I am grateful!
Source: Cracking the Code on Wealth Preservation: It is not about Money, Maarten de Groot