The odds are gloomy: Just one in three family-owned businesses make it to the second generation and less than five percent make it to the third generation.
But I recently had the opportunity to meet aftermarket companies that are beating the odds. The “Next Generation Seminar,” sponsored by Northwood University and Randall-Reilly Publishing (publisher of Truck Parts & Service), brought together fathers, sons, daughters and cousins to discuss how to keep the family business in the family.
It was impressive and uplifting. Here were earnest young men and women recently graduated from college, eager to take on the family business and build upon the successes of previous generations.
Often when people think of family-run businesses they think of small, niche businesses operating without much savvy and sophistication. It’s a misperception. As cited in a 2006 BusinessWeek special report, the University of Southern Maine’s Institute for Family-Owned Business concludes that family-controlled businesses:
- Represent 35 percent of the Fortune 500 companies;
- Account for 50 percent of the U.S. GDP; and
- Generate 60 percent of the nation’s employment.
In our own industry, family-run distributorships and service shops run the gamut from small, single-location companies to large ones with a dozen or more facilities. Justin Pasdach, who will be attending Northwood’s DeVos Graduate School of Management this fall, will be contributing to a family-run distributorship – Midway Truck Parts, owned by father Pete Pasdach, a former Truck Parts & Service Distributor of the Year.
But regardless of size, finding quality managers is typically the top issue mentioned in the aftermarket. Business owners want to leave their legacy in trusted hands. Or, if considering expansion, want to be assured their venture will be well run.
Keeping the business in the family seems like a natural solution. But blood relative doesn’t automatically mean qualified relative. We probably all have a relation that we wouldn’t trust carving the Thanksgiving turkey, let alone taking responsibility for the family business.
The high rate of failure among family-run businesses, I think, is for one of two reasons: Either the successors want to stake out their own success in an unrelated industry; or the inheritors feel an entitlement to the throne that destines them for failure.
At the “Next Generation Seminar,” I saw examples that defied these two obstacles. The students in attendance are not only willing to carry on the tradition, they are making choices to take on continuing education specific to the industry that will give them an edge.
It’s one thing to drag a son or daughter to the family business in the hopes they’ll stay, it’s another to have them volunteer to schooling to make that business successful in the years ahead. Justin and others at the seminar all recollected memories of pushing brooms or helping however they could at the family business.
The Northwood education will help turn pushing brooms into pushing boundaries – growth of facilities and services, adopting new technologies, and, ultimately, keeping it in the family for generations to come.