The Coming Crisis of the Family Business
If someone told you that about half the people who run half of America’s most active and inventive businesses will retire in the next four years, would you care? You should.
Ownership transition is deadly for the 90 percent of American small businesses that are family-owned or closely-held: by some estimates, fewer than 30 percent survive to the second generation and just five percent to the third. And these businesses are the very foundation of this nation, responsible for 45 percent of the United States’ Gross National Product (GNP). While 80 percent of them have 20 or fewer employees, they generate more new products, create more jobs, and contribute more to local communities than the “too big to fail” corporations grabbing headlines today.[i]
Let’s face it. The Baby-Boomer generation that created this growth is getting tired. Aging Boomers are considering their retirement options and many are reluctant to stay and fight through one more recession. This trying economy and gloomy market forecast are pushing many small business owners to step away from their role, resulting in one of the largest turnovers in management in the history of American family-owned business.
What can we do? First, recognize there’s a problem. Second, realize we need an integrated solution that brings together business owners, professional service providers, community partners and active citizens.
Professional service providers, such as financial planners, accountants or estate-planning attorneys must identify the best fit for the small business owner’s style and needs, and design solutions that are integrated with the strategic goals of the business and the personal goals of the family.
Public sector community partners can become aware of and support small businesses in a number of ways. Chief among them is providing education. Business owners need webinars, workshops and other non-traditional opportunities to learn about specific issues they face (succession planning, exit strategy development and hiring, for example). Small businesses also need employees trained in technical, mechanical, agricultural and customer service skills. University extension services and local Community Colleges are vital knowledge transfer agents in this area and should be supported.
Finally, as citizens of this national community, we all have a responsibility to protect and support our local family businesses. As a concerned citizen, you can:
Identify and support local businesses – think twice before shopping on the Internet for products you can purchase in your own town.
Join cooperative programs such as Community Supported Agriculture (CSA) designed to produce regular cash flow and sustain small businesses through seasonal ebbs and flows. CSAs let consumers buy seasonal food directly from a local farmer, usually by purchasing a membership share that will entitle them to fresh produce each week throughout the growing season. The membership fee enables the farmer to maintain cash flow and invest in the business throughout the year; all parties benefit.
Join business advisory boards and share your knowledge and skills. Advisory boards are small, committed groups of seasoned experts who come together to assist a business to meet its strategic potential. A well-formed advisory board can provide a cost-effective and highly valuable service that would otherwise be difficult for smaller businesses to access.
Let your elected officials know that you want to see programs and incentives aimed at small and medium LOCAL businesses – to both attract and retain them.
Family-owned and closely-held businesses endure or die out depending upon how effectively they plan for the future. With the help of professional service providers, community partners and active citizens, those that survive will re-create the energy and wonder that fueled the original entrepreneurial spirit that made this nation great.
[i] The PricewaterhouseCoopers Family Business Survey 2007/2008; Making a Difference; Family Business Series.