It is not surprising that most family business entrepreneurs can first be described as inventors and innovators – a new concept, a new idea, a better mousetrap, a smarter/faster manufacturing process.
“But being an inventor or an innovator is only part of the equation for being a successful family business entrepreneur,” according to top family business expert
“The formula also includes vision and the wherewithal to turn that vision into a new reality – that is what makes a family business entrepreneur so special. As individuals they have a great deal of passion, energy and the ability to make personal sacrifices - a laser-focused commitment to being successful and, as is often the case, a shot of “serendipity!”
Schwerzler has been studying and advising family business entrepreneurs for more than 40 years and is the founder of Atlanta-based
Family Business Institute.
The toughest task facing most entrepreneurs, when they are starting and building a family business, is the need for so many skill sets beyond their own innate experiences and abilities:
The engineer who invents a new product but is not good at sales and marketing; the new restaurant owner who doesn’t understand the economics of portion control; the super sales person who does not understand a balance sheet; the business owner who makes poor hiring choices; a business owner who does not understand how to use a web site to build their business; the business owner who is busy building the business but does not put money aside to pay the taxes; adding unqualified family members to the payroll when others would be better suited for the job; selecting a business partner that does not pull their fair share of the work; hiring professional service providers, not because of their abilities but because they are the least expensive – this is the kind of list that could go on forever!
The scarcity of resources is a problem that haunts most family business entrepreneurs as they chase their vision – the lack of time, money and people with special skills needed to build their business. One strategy that works well is to create a
family business advisory board.
The scarcity of resources is not just a business problem – it is also a problem on the family side of the family business equation.
The role and the importance of the entrepreneur’s spouse is equally fascinating. In the traditional model, the spouse assumes a larger responsibility for raising the kids and running the home. Today, when most married couples are a ‘two career’ household and would like to start their own business, one stops working the “day job” to build the business and the other keeps working to produce income for the family to live on – and to help finance the growth of the business.
Tips for Preparing the Family for Entrepreneurship
Once the family business entrepreneur has successfully launched the business, marketing becomes a crucial part of sustaining traction – the best strategy is to build an effective
Another helpful strategy is understanding the benefits of
Under-capitalization is one of major reasons so many family businesses fail. The last few years the US economy has tanked and traditional bank relationships have stopped making loans.
Many family business entrepreneurs have found
options that proved to be great financial resources.
Dwight Eisenhower noted that “planning is nothing, the planning process is everything”.
A real obstacle for many beginning entrepreneurs is evolving the family business from an informal style of management to a more planful or formalized style of management - by developing the infra-structure required to grow the business in size and profit. This involves continually perfecting the business plan; understanding the importance of measuring operational performance;
measuring operational performance;
developing employee job descriptions and employee handbooks; understanding and learning from the financial feedback from the accounting system and perhaps even developing a rudimentary
Many family business entrepreneurs start thinking about creating their succession plan around age 60. But preparing the next generation of leadership and ownership for the family business should start much earlier. A crucial element in the developement of a succession plan is to define the role of the
Preparing the family and the family business for succession often produces conflict within the family and within the business. When a family business needs our help growing the family's business, help to maintain healthy family relationships and/or help, when the time is right to help transition the business from one generation to the next (or preparing the business for sale if that is a better option for the family business owner), our first step is to conduct a
Family Business Assessment
, a process we have perfected working with many hundreds of family businesses across a broad spectrum of industries.
When things seem to be “coming up roses”, family business entrepreneurs find out that they must contend with government regulations and red tape. To put it in perspective, the hidden cost of supporting the government regulation and red tape is estimated by researchers at $1.75 trillion dollars per year!. It is estimated that a family business needs to grow at least 10% a year just to keep up with inflation. To gain a better understanding of how government regulation, taxes and inflation (the hidden tax) affect the accumulation of wealth, we recommend our family business clients read
The Creature from Jekyll Island
And then, at the end of the life cycle of the family business entrepreneur, he/she finds out that they have a silent business partner – the IRS. When the entrepreneur fails to develop an exit strategy or a succession strategy, many family businesses go out of business due to having to pay estate taxes commonly referred to as the
After all of the blood, sweat, tears and sacrifice – it just doesn’t seem fair, does it?
We always encourage our family business clients to spend time on their personal development - young and old alike! If you are a family business entrepreneur you will find this lecture on the Gilded Age and the Robber Barons well worth you time!
Founded in 1844, Hillsdale College is an independent, coeducational, residential, liberal arts college with a student body of about 1,400. Its four-year curriculum leads to the Bachelor of Arts or Bachelor of Science degree.
“Hillsdale College offers a series of on-line classes that I have found most interesting,” notes
family business strategy master
Don Schwerzler. “I recently attended a lecture presented by Dr. Burton W. Folsom – The Gilded Age and the Robber Barons where he makes an incredibly important observation – the remarkable difference between Market Entrepreneurs and Political Entrepreneurs!
Burton W. Folsom, Jr. is professor of history at Hillsdale College and holds the Charles F. Kline Chair in History and Management. He earned his B.A. at Indiana University, his M.A. at the University of Nebraska, and his Ph.D. at the University of Pittsburgh.
THE GILDED AGE and the ROBBER BARONS
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