Inheriting a family business is kind of like starting the climb to Mount Everest halfway up. But do the pros outweigh the cons?
Shortly after my husband graduated with a degree in chemical engineering, his dad decided to retire from his thriving chemical distribution business. Unexpectedly, Steve had a decision to make: Do you want to take over the family business? It was an exciting, but daunting, prospect fraught with potential. Steve and I were already married at the time, so it became one of our first “family” decisions. Together, we agonized over the pros and cons to decide if it was the right thing for him.
The Pros of Taking Over the Family Business
It’s a statistic that should send shivers down the spines of entrepreneurs: 96 per cent of business fail within 10 years. There are myriad reasons for that abysmal success rate, including poor customer relationships, failure to understand the market, lack of financing and simple inexperience.
When you look at it that way, inheriting a family business is kind of like starting the climb to Mount Everest halfway up. While it takes hard work, diligence and some entrepreneurial spirit to keep the climb on track, you’ve got a huge advantage on people who start from scratch.
Starting your own business is a risky proposition. The initial struggles—building a clientele, securing suppliers and employees, establishing a foothold in the marketplace and figuring out systems like accounting, IT, customer relationship management and other infrastructure often take years to sort out.
When taking over a family business, all of the groundwork has been laid and you’re free to conduct “business as usual” while you explore new directions the company could take under your leadership. If you’re lucky enough to inherit experienced employees who understand the ins and outs of the business, you’ll have an easier time with your transition. Plus, having the ear of the former CEO anytime you want is a huge bonus that will help prevent making critical errors that could cost businesses in their infancy everything.
A Mid-Career Start
Most of us start our careers at the bottom and spend years working our way to a position of leadership. Taking over the family business allows you the flexibility to skip the grunt work and get right to the good stuff. While that might mean missing out on valuable learning experiences, you’ve got the aforementioned former owner on speed dial to help hand down the hard lessons so you don’t have to make the same mistakes.
A Career with Meaning
While the chemical distribution business isn’t necessarily a thrill ride in and of itself, my husband was intrigued with the idea of building on his Dad’s legacy. Owning a business, contributing to the economy and providing jobs in the community is a fulfilling way to earn a living. And there’s an additional element of pride when you’re carrying on a tradition.
The Cons of Taking Over the Family Business
One of the worst case scenarios that Steve and I could imagine was having every family gathering monopolized by business discussions. Between Steve looking for legacy information and his dad wondering how things are going in his absence, there was a huge potential for a giant shift in family dynamics. And what if Steve decided to take the business in a different direction—one in which his dad disapproved? Talk about family tension. Work/life balance is tricky for all entrepreneurs. Taking over the family business cranks that challenge up several notches.
With great power comes great responsibility. Becoming an employer and taking on a legacy operation locks you into a career, all but eliminating the possibility of a seamless transition to other work possibilities. Steve was at the very beginning of his career and was open to all kinds of applications of his skills and talent. Taking on the family business would narrow his own potential for finding meaningful work on his own terms.
If you’re jumping into the family business, you’ll perpetually be known as the “owner’s offspring.” While there are advantages to that lofty position, there is the potential for an identity crisis, not to mention possible friction with established employees, suppliers and clients who may believe you haven’t earned the right to be the boss.
In Steve’s case, a fresh engineering degree was not a great qualifier for becoming the president of a mid-sized company. While he understood the business to some extent, he had not apprenticed for his dad and certainly didn’t have business experience or training. Though the company was stable enough to withstand some of his learning curve, it would have been a challenge for everyone, including employees.
Truthfully, it didn’t take a ton of soul searching for Steve to decline his father’s generous offer. There were a number of reasons, but concerns about location (we’d have to move from the city to the suburbs to make it work ), the likelihood that his relationship with his dad would be all about work for the rest of their lives and his desire to build a career on his own steam were the ultimate deciding factors.
Today, after almost 20 years with the same company, Steve is at the helm of a chemical manufacturing business as part-owner (though in a different industry than his dad’s former business). He’s grateful that he took the opportunity to work his way up, learning invaluable insights and precious experience he certainly wouldn’t have had all those years ago.
Tips to Help You Make Your Own Decision
As a journalist, I’ve written dozens of company profiles—many of which are successful multi-generation family businesses. Invariably, I ask the secret to their success. Here are some of them:
- Draw up a mock business plan for the company under your management. The act of writing your vision will clarify your thinking and help you decide if you’re excited about the prospect of building on your family’s success—or if it feels like a burden you’d rather not take on.
- Create a five-year succession plan with the outgoing owners. This will allow you to work alongside your family to learn the business, make some small changes of your own and establish trust with employees, suppliers and clients. Plus, your family will adjust to the idea of taking a less hands-on leadership role, which will help with their transition to retirement.
- Talk openly about potential challenges. Ask tough questions of your retiring family members. One family even invested in family counselling to help with the adjustment.
- Be flexible. You’re not starting your own business—you’re carrying on the legacy of someone else’s vision. That doesn’t mean that you can’t make it your own in time, but it’s important to be respectful of the original business’s integrity. Consider building on established success rather than taking a sharp turn in another direction. At least at the outset.