Family life is complicated, and so is running a business. Putting those two together makes things even more complicated. Despite that, family businesses contribute 64% of the US’ gross domestic product, 62% of the country's employment, and 78% of all new jobs. Furthermore, 35% of US-based Fortune 500 companies are family-owned. The reason for this is simple – who else would people start a business with, other than the people they trust the most? Most often, these people are their family members.
For a family business, one of the most challenging issues is handing it over from one generation to the next. This transition is a very delicate process, and mistakes can have serious consequences, not just for the business, but for the family and its relationships, as well. The Common Good Family Business Center, founded by Jared Byas, specializes in helping family businesses navigate the delicate issues surrounding family businesses, helping them work out solutions that benefit both sides – the family and the business.
According to Byas, 60% of family businesses fail or are sold before the second generation, and only roughly 10% survive until the third generation. He says that it is worrying to have such a high failure rate for a major contributor to the US economy. Furthermore, to address this problem, Byas says it is important to focus first on the family aspect and the welfare of people. Sometimes, the family and individuals get sacrificed for the sake of the business, and they end up with unhealthy and unhappy individuals and families who are unable to bring their best to the business.
Many first-generation entrepreneurs approaching retirement come to Common Good Family Business Center to create a succession plan that eases in the next generation, gradually allowing them to take more responsibility in running the business. Having grown the business from scratch, the first generation knows the ins and outs of the business and are used to being on top of everything. However, when the time to transition comes, they suddenly don’t know anything about it, and are put into a position of vulnerability.
The Common Good Family Business Center helps manage that process by giving them a structured plan while ensuring open communication between family members and, hopefully, keeping the relationships intact by the end of the process.
Byas applies his expertise, gained from advising family businesses for more than a decade, in the transition process, which is dependent on a particular business’ size, which determines its structure. For businesses between $10 million and $20 million, a single person, usually the founder, is frequently in charge of all the business decisions, carrying everything on their back and looking to take it as far as possible. By the time the business transitions to the second or third generation, the owners will need to start establishing a functional organizational chart and delegating responsibilities with a more formal team structure.
“There definitely needs to be a different approach when a business is hitting that $10 million to $20 million mark than if it were at $3 million to $5 million, where they can just replace one primary leader with another primary leader,” Byas says. “That again changes when the business gets to $50 million and above, where they have to do higher level corporate governance, such as establishing a board of directors and further regulatory processes.”
The Common Good Family Business Center’s services include succession planning, management/ownership transition, retirement planning, leadership development for the rising generation, and role clarity & communication improvement. It helps develop healthy sibling partnerships to minimize fighting over the business inheritance. Additionally, the center also conducts various educational events, workshops, and community connections to raise awareness about the unique needs of family businesses.
Byas shares one particular success story about a business family he has been working with for five years. The family’s third generation, now in their eighties, transitioned the first business around 20 years ago, with Byas coming in to help resolve some residual matters. For the family’s second business, Byas is guiding the fourth generation in assuming leadership, while preparing the fifth generation, now in their late teens and early twenties, to become involved. According to Byas, it’s important to start the preparation early, and he has been holding meetings with the fifth generation, even when they were still children, educating them on what it means to be part of a business family.
“We at the Common Good Family Business Center believe that maintaining good, healthy relationships is not just good for the family, but it's better for our society than just having successful businesses with a lot of unhappy people in them,” Byas says. “Using our unique set of skills and experience, we ensure that family businesses are smoothly run while balancing it with a harmonious relationship. Everyone knows a story about how a business transition has torn a family apart. They are scared of that, and they want to avoid it.”
Media contact:
Name: Karen Peazzoni
Email: [email protected]
