Clear plan helps business succession
While most businesses are family owned, fewer than a third survive to the second generation, even less to the third and fewer still to the fourth, according to the Family Firm Institute in Boston.
The problems usually begin when the founder is reluctant to relinquish control of the business, according to experts. Or, too many members of the next generation are vying to take over. And with every subsequent generation, there are not just siblings but cousins in the mix.
"Why a business fails is they don't have a strategic plan," said Dawn Jinsky, a partner at Plante Moran whose wealth transfer group oversees business successions. "A family starts making decisions about how they can benefit from the business and the business can't survive."
The family-owned businesses that survive and thrive for many generations have rules. Who gets a pay cheque and who gets any dividends? Are there entrance requirements for joining the business, such as having a university degree? Who makes decisions about the direction of the company? What are the rules for spouses? And so on.
Germack Pistachio in Detroit is far from the small company Frank Germack III's namesake founded in 1924. Most recently, he and his co-owner sister Suzanne Germack Frederickson added coffee to the product line - after some sibling discussions.
Besides always re-imagining the company, Germack advocates relatives work for other companies first before joining the family business, to garner outside experiences.
"Manage the business for the next generation, as opposed to (taking) imprudent risks. We're always thinking about the next generation and that can change how you're running the business today," Germack said, pointing to how in the past year and a half, the family decided against acquisitions in South Carolina and Illinois.
"We didn't want to have the company based in different states, and it would've been stressful for the family."
David Pereira recalled seeing his great-uncle Abe Minowitz, founder of Minowitz Manufacturing, say good morning to all his employees. When the 42-year-old became president the Michigan-based defence contractor, he started doing the same.
Pereira shares management duties with his father, Paul, now chairman, who took over the business after none of Minowitz's kids got involved in the business. Minowitz died in 1988; the four members of the fourth generation are too young to have solid career plans.
"Business never gets personal. I'll see my father after work a lot and we don't talk about the issues. He will remind me I have to do A and B, though," David Pereira said.
"The secret to a successful family business is make all the employees feel welcome and make them feel they're working for a family and are a part of the family and the business. People come to work happier. They're proud of what they do."
