FLORENCE – Most family-owned small businesses do not survive into the second generation because of breakdowns in communication and trust among family members.
That’s the assessment of Steve McLemore, the engagement director for the Goering Center for Family and Private Business. He contends family conflicts, not monetary issues, are the biggest villains.
“The hard stuff is the people stuff,” he told members of the Florence Rotary Club at a luncheon on Monday, December 4.
The Goering Center provides training on leadership development, communication techniques, strategic planning and succession planning. McLemore spoke to the Rotarians about factors that spell success or disaster for privately-owned businesses.
The survival rate for family businesses is not good, he said. He cited statistics that indicate only 30% of family businesses survive into the second generation. The rate drops to 10 percent for the third generation and 4 percent for the fourth generation. The average longevity is 24 years.
In McLemore’s view most fail because family members take problems at work home with them and “they spill over into their relationships.” Conflicts lead to breakdowns in communication and trust. The key to survival is separating family issues from business issues.
“This is not an economic issue. It’s a society issue,” McLemore said.
McLemore said the Goering Center helps small business owners communicate better, plan better and create signed agreements among family members. Signed agreements that spell out what family members contribute to the business and what the business contributes back to the family members are critical, even among family members with no history of disagreements or conflicts.
“The best indicator of a successful business is a signed agreement,” McLemore said. Such agreements aid communication and facilitate trust because they separate family decisions and businesses decisions, he explained.
The Goering Center is affiliated with the University of Cincinnati College of Business. Founder John Goering served as an accounting professor, assistant dean and university registrar at UC.
The center does not provide consulting services, McLemore said. The center offers training institutes; breakfasts, business forums and symposia; and roundtables and awards programs.
