It is often said that family businesses struggle to survive beyond the third generation. In fact, according to a PwC study, only 12% of family businesses succeed into the third generation. This harsh reality highlights the importance of laying solid foundations that allow entrepreneurs to establish a true business legacy for their descendants.
A recent survey by Wise Advice revealed that 88% of millennials would like to follow in the footsteps of their entrepreneurial parents. However, only 54% feel they have the mindset and skills necessary to successfully run a family business. This gap can be a major challenge for generational continuity.
So, how can founding entrepreneurs build a family business that endures across multiple generations? Here are some key strategies:
Solid Succession Planning
Having a clear and well-structured succession plan is crucial. Identify potential successors early and prepare them by training them in all aspects of the business. According to the Successful Transgenerational Entrepreneurship Practices (STEP) Project Global Family Business Survey, companies with a robust succession plan are 32% more likely to continue operating after the third generation.
Professionalization and Governance
As the business grows, it is critical to separate ownership from management and implement a corporate governance structure. An independent advisory board and clear family policies can prevent disputes and ensure objective decision-making. The Family Firm Institute found that family businesses with external boards grow 37% faster.
Entrepreneurial Values and Mindset
Beyond imparting technical knowledge, it is key to instill the entrepreneurial mindset, work ethic, and core values in new generations from an early age. Involve them in the business, let them live the entrepreneurial passion, and serve as mentors.
Evolution and Innovation
Successful family businesses are those capable of evolving, adapting, and reinventing themselves with each generation. According to a Deloitte study, 58% of companies that survive three or more generations implemented significant strategic changes. Continuously innovating, adopting new technologies, and listening to younger generations is crucial.
The path to a true entrepreneurial legacy is not easy, but with planning, proper structures, solid values, and an innovative mindset, family businesses can become multigenerational dynasties of success.
