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Focus on 'Family' Is Key to Long-Term Family Business Success

Focus on 'Family' Is Key to Long-Term Family Business Success
Non-family businesses can learn a valuable lesson from a "family business" attitude. / Credit: Paper dolls image via Shutterstock

According to Family Enterprise USA, 5.5 million family-owned businesses operate in the United States. What's the secret to their success? It just might be the "family" aspect that makes these organizations thrive.

"The business world knows that if you take care of the customer, the bottom line will take care of itself," said Paul Gentilini, owner and dealer principle of third-generation car dealership Gentilini Motors. "Family-run businesses take it a step further — if you take care of your employees and treat them like family, they will take care of your customers and treat them like family. The business will thrive with loyal patrons and employees, and continue to grow and be profitable even during tough times."

What truly drives many family businesses is the sense of connection and identity the owners and their family members feel with the business, said entrepreneur Allen Fishman, founder and executive chairman of business coaching services provider The Alternative Board (TAB). [5 Survival Tips for Family Businesses]

"In family businesses, [the founder and employees have] an incredible passion for the business, and a focus and energy that you'll never find in a non-family employee," said Fishman, who is also the author of "9 Elements of Family Business Success" (McGraw-Hill, 2009). "They're so focused on the business' success that it's part of their identity. [The business] isn't the life of non-family employees. In general, they won't identify themselves with the business being part of who they are the way family members do."

Gentilini said that non-family businesses can learn a valuable lesson from this "family business" attitude.

"The core values of a family-run business are based on the core values of family life — every member of a family is there for the other members in their time of need, no matter how big or small that need is," Gentilini told Business News Daily. "A non-family business can benefit from applying family values to their operations by creating a culture that has people wanting to work harder for them because they feel like family, not a number."

"[A family business attitude] makes all employees feel like part of the business," added Don Gentilini, Paul's uncle and previous owner of Gentilini Motors. "We watch out for each other and make sure all customers are treated the same every day, every time, by everyone — like family. My dad expected more from our family than our employees because we had to lead by example and being more than just an employee working a job. Family is expected to do more and be better. That behavior flows into all employees and helps us meet our daily goals."

Despite the strong company culture typically found in family businesses, not all of them succeed: The Family Business Alliance found that just 30 percent of family-owned businesses are passed down to the next generation, and only 12 percent remain viable into the third generation. A recent TAB survey found that lack of succession planning is one common reason that family businesses fail to stay within the family.

"Twenty-nine percent of business owners do not have a succession plan," said David Scarola, vice president of TAB. "Without one, it's easy to understand how owners of family businesses can lose the legacy they've worked so hard to build."

Family business succession also faces the issue of a lack of training. Although 45 percent of owners say their children are involved in their business, 62 percent say it's unlikely their business will remain family owned when they sell or retire.

A lack of confidence in leadership abilities could account for this gap, said Scarola, who noted that training family members early and thoroughly can go a long way in building that necessary confidence.

The perceived special treatment of related employees and the mixing of family and work issues can also cause points of contention in a family business setting, Fishman said. To ensure the success of any family members hired, he advised family business owners to operate with a certain level of objectivity.

"If you bring a family member into the business, get them to work outside the company first," Fishman said. "Make him or her learn how to take direction from others, so the family dynamic is neutralized. If spouses work together, make sure your roles are separate. Don't discuss family matters at work or work matters at home."

Originally published on Business News Daily.

Nicole Fallon

Nicole received her Bachelor's degree in Media, Culture and Communication from New York University. She began freelancing for Business News Daily in 2010 and joined the team as a staff writer three years later. Nicole served as the site's managing editor until January 2018, and briefly ran Business.com's copy and production team. Follow her on Twitter.