Family-owned Businesses
Walking the Fine Line Between Family and Work

By Jennifer Sorensen

Myth: Family businesses are suffering financially, and their role in the national economy is not as important as that of larger, non-family-owned companies.

Reality: Family members have majority ownership in 80-90% of all businesses in the U.S. In fact, family businesses are the fastest growing segment of the U.S. economy.

While family businesses are valuable financial resources to their owners, employees, and future generations, the growth of family firms also has a significant effect on the country's overall economy. Family businesses employ approximately 70-80% of the population (generating more new jobs than their competitors), with profits comprising over 55% of the GDP. More than one-third of New York Stock Exchange companies and one-third of Fortune 500 companies are family businesses.

Furthermore, family businesses play an influential role in society because of their commitment to community, their sense of responsibility to give back to those who aided them in their success, and because of a motivation driven by the ideals of family, partnership and responsibility rather than solely that of making a profit at any cost.

The Benefits and Challenges of Working in a Family Business
Working with people you love, sharing a long term definition of success, being your own boss, having flexibility and security, and building a financial legacy for retirement and future generations are just a few of the benefits that family businesses boast.

"If one person is sick, there is always someone to back you up," says Jennifer Abney, co-owner of Bellini in Houston with her husband, David. "The other biggest benefits are that we make all the rules, and all profits stay in the family."

Moreover, these benefits contribute to a successful business identity and reputation. "If people see you are a family company, they will instinctively trust you more. They will know that you are in it for the long run and are more likely to put your relationship with them above a single transaction," says Wayne D. Messick, consultant at the Mediation Training Institute International in Overland Park, KS.

In addition, family businesses can change and intergrate management and sales practices without contending with many of the bureaucratic hassles of larger companies. "By their very nature, family companies are very flexible and quicker to act since the people who make all the decisions often eat Sunday dinner together," says Messick.

On the other hand, these benefits can generate serious challenges. Since issues that relate to families also relate to family-owned businesses, any family relationship problem can spill over into the business arena. And if there are unresolved family issues, says Paul Karofsky, Executive Director at the Center for Family Business at Northeastern University, "There is no way your (family) relationships are going to get better by going into business together. When things aren't going well, dysfunction comes to the fore." Karofsky, who includes parenting skills publications on the reading list he recommends to family businesses, strongly advises family members to work on developing open communication early on to avoid potential problems.

Researchers at Kenesaw State College uncovered three underlying causes for the failure of family businesses to survive: unresolved conflict, failed leadership, and lack of shared goals on a personal, family and business level. Some other major sources of conflict in family businesses tend to be differences over management roles, sibling conflict, money, lack of long-term company vision and succession issues.But there are ways to manage family issues so that they do not get in the way of family business success.

Effective communication, identifying clear roles and responsibilities, recognizing official structures of management, and a commitment to the ideas and the creative input of others inside and outside the business can help you get or keep your family on track. The key, says Karofsky, is "not to avoid conflict, but to learn how to manage it."

"It's a Twenty-Four Hour a Day Job"
Maintaining boundaries between work and family is a big challenge. "The saying 'all work and no play...' is true," says Doug Sprenkle, Ph.D, professor of Marriage and Family Therapy at Purdue University. "You can't be working all the time...or you have no energy left over to nourish family relationships."

When both siblings and parents manage the business, they often face the difficult challenge of negotiating between two disparate value systems: the family that offers unconditional love, and the business that depends on performance and profits.

Rick Decruz of The Baby Gallery in Elizabeth, NJ, whose father, mother, brother, and first cousin run their two stores, says, "To me, you can't separate the family from the business. It is a twenty four hour a day job. It definitely gets interesting. My brother is out of the house, but I'm with my parents twenty-four hours, seven days a week. It's tough--I'm not going to lie." However, Decruz is quick to say that this allows them the flexibility of not mincing words. "As sons to their father, we take more liberty in what we say. To a regular boss...we would be fired."

For husband-wife teams, relationships can get even more tricky to maintain unless they agree on some physical and mental boundaries. "It can be trying, but it is actually great. We separate our duties to keep it as simple and clean as possible," says Sue Hyde, co-owner of Once Upon a Child. "Fred takes care of the logistics of new products, placing orders, transferring items to the warehouse, advertising and marketing. I take care of the day- to-day store management and accounting."

Jennifer Abney agrees with the concept of separating work duties. For example, while her husband handles the deliveries, customer service and set up, Jennifer is in charge of all buying, display and in store customer service. They even share the duties of bookkeeping and accounting. In addition, Jennifer's father, an architect, helps with the design aspect, her mother-in-law, having been a bookkeeper for 30-40 years, double checks the books, and her retired father-in-law builds some of the custom-built furniture they sell. Nevertheless, working together almost daily leaves little time for personal growth. For this reason, Jennifer and David take one day off separately during the week and agree to save Sundays as a family day. "It's an unspoken rule," says Jennifer.

Sprenkle takes it a step farther. "Husband-wife teams, especially those who run their businesses out of their homes, should maintain physical boundaries separating the house from the business." For instance, the bedroom should not be the place to discuss marketing strategies for the new line of strollers you just ordered. Try to limit the business aspect of your life to certain areas of the house or certain times of the day.

Some other day-to-day strategies for keeping communication flowing but not intruding on your family time include scheduled family meetings, special retreats, or employing the help of an outside consultant. In fact, family businesses, regardless of their size, might even consider organizing a board of directors to help with strategic planning. Even if you can only afford to meet with them a few times a year, hiring specialists to guide you in marketing, merchandising, technology, or finance can provide you with more objective guidance to facilitate change or growth.

The Future of Family-Owned Businesses
In the midst of moving to a larger location in Chicago, Lazar's Furniture, run by Victor Lazar, his son and his daughter, is gearing up for its fourth generation of customers. When asked why he thinks he continues to be so successful, the elder Lazar answers, "Retail has always been difficult. But our employees do not work on commission, so they help customers. They sometimes spend hours with perspective customers. We never force a sale." In addition, he says, "Its nice to know you have family members around-and loyal employees who are like family. Balance is important. We take the bad with the good."

Like Lazar, many family businesses are gearing up to pass their businesses on to future generations. According to Karofsky, six to twelve trillion dollars will pass hands from one generation to the next as baby boomers exit their businesses in the next 15-20 years.

According to the Center for Family-Owned Business, only 30% of family businesses make it to second generation, and 10% of family businesses make it to the third generation, but only 28% of owners have planned for succession. Still, both business owners and family business professionals are optimistic about the future of family businesses. "With the cost of technology going down every day, a small nimble family business can look, act like, and most importantly be perceived as being much bigger by its customers and competitors," says Messick.

Indeed, the internet can play an important role in offering family businesses an advantage. Not only is it affordable for family businesses to have a web site, but technology itself can allow even the smallest business owner to have employees work from their home. "Jobs can be done from marketing to bookkeeping and beyond, without someone coming to the store and taking up space," says Messick.

Where to Turn For Help
With baby boomers better prepared and less resistant to seeking outside advice, analysts predict a greater rate of survival in the future for family owned businesses. As a result, the field of business consulting is growing with the expansion and economic strength of family businesses. "A lot of the family business consulting and research is done irrespective of the size of the business. "Family business issues are the same if your revenues are $100,000 or 100 million," says Edward C. Wachter, Jr., an attorney and partner at McCann, Garland, Ridall & Burke in Pittsburgh, PA and business professor at Point Park College. "Multi-generational businesses are doing better because family business issues are being addressed."

Family business consultants come in many different packages, and depending on your needs, they can counsel you on everything from succession planning to arbitrating differences between sibling partners. Look for an advisor who is experienced in family business strategies, government issues, and possibly has personal experience in running a family business. Word of mouth can be helpful, but don't rely solely on references warns Karofsky. Instead, inquire about the types of projects they have been involved in, interview two or three, and rely on someone with academic credentials.

Regardless of who you choose, Mendoza warns that family members should have a plan before they visit any kind of consultant because they know their business better than anyone. Experts can then coordinate with the family and execute a plan that has come out of a process of communication among family members knowledgeable about the daily complexities of running their ownbusiness.

However, many family businesses continue to be successful without outside advice. Victor Lazar, who has never used an outside counselor even though his family is inundated with inquiries, is one of them. "They've never been able to tell me anything I haven't learned the hard way." For some, life experience is the only counselor necessary.

Jennifer Sorensen is a freelance writer and copy editor for Baby Shop and a publication manager/advertising executive at Spindle Publishing Company.

RESOURCES
New fields of study and professional services are emerging to assist family businesses. Contact these and others for advice on mediation, financial questions, succession, estate planning, ownership transfer, tax related matters, seminars, teambuilding, conflict resolution, growth strategies and much more.
Family Business Institute, Inc. 770-952-4085. www.expert-market.com/ familybusinessexpert Succession planning, business management, and development concerns. Northeastern University Center for Family Business 781-320-8015 . www.nmq.com Family business issues explored by Paul I. Karofsky, Executive Director. E-mail him at pkarofsky@lynx.neu.edu. Center for Family-Owned Business, Inc. 717-464-5173 . www.cfob.com Consulting on succession issues and more. Small Business Administration www.sba.gov Created in 1953 to help American entrepreneurs succeed. Offices in every state offer financing, training, and advocacy for small businesses. Family Business Resources fambiz.com Lists universities that host family business centers among other resources. Purdue's Marriage and Family Clinic 765-494-2952 . email: doug_spru@holli.com Contact Doug Sprenkle, Ph.D. for information on family relationship/business consulting.	Mediation Training Institute International 913-341-2888 . www.mediationworks.com Contact Wayne Messick at wmessick@asan.com. Visit his website at www.waynemessick.com for information on workplace communication and/or conflict management. Family Business Roundtable, Inc. 602-285-1207 . info@fbrinc.com Resource for family businesses and information of family retreats, latest news affecting family businesses, and a recommended reading list. Family Business Management Services www.familybusinessmgt.com Listing of books that address business continuation planning. McCann, Garland, Ridall, & Burke Legal firm serving family businesses. Contact Edward C. Wachter, Jr. at 412-566-1818 or e-mail him at ewachter@counsel.com or visit www.ed-wachter-esq.com.