Running a Family Business Takes Best Practices
RESTON, Va.— With more than 150,000 convenience stores across the United States, the channel boasts a variety of business models — large chains, single-store operations, small retailers — and some prove convenience can be a family affair.
And it's not just the retail side of the equation that counts numerous family businesses; the wholesale landscape is dotted with families that have made the business more than just a career.
But just like a family itself, a family business can be tricky to navigate. Henry Hutcheson, president of Family Business USA, should know: his family owned and operated the Olan Mills portrait studios for three generations.
"We've been through almost all of the issues family businesses have gone through and we got through them," Hutcheson said during an Aug. 9 webinar hosted by the Convenience Distribution Association (CDA), the trade organization that works on behalf of U.S. convenience products distributors.
Pointing to the 2014 America's Richest Families list by Fortune magazine, Hutcheson noted that the top 24 are all family businesses. But it is difficult to be in business, he added.
"What does a family look like from the outside? The Brady Bunch. Everyone is happy and smiling, and there is music," he explained. "But what goes on behind closed doors is more like the Addams Family."
According to Hutcheson, there is value in owning your own business. In fact, Warren Buffett, CEO of Berkshire Hathaway, said "our long-avowed goal is to the 'buyer of choice' for businesses — particularly those built and owned by families," he added.
Looking at the numbers, 80 to 90 percent of all businesses are family-owned, -run, or –managed. They generate 78 percent of new jobs and account for 62 percent of employment. In addition, one-third of the Fortune 500 are family businesses, he explained.
"Family businesses outperform non-family businesses," he noted, adding the key driver is trust.
"Getting three or four family members in a room creates an extraordinary bond of trust," Hutcheson said.
While those numbers are impressive, there are others that paint a slightly different picture. For example, 33 percent of family businesses will successfully pass into the next generation — meaning 67 percent will not. Also, 45 percent of CEOs at family businesses that plan to retire in five years have thought about succession — conversely, 55 percent have not, he explained.
Another fact is that 85 percent of these businesses have identified a family member as the successor, but this can cause problems, he said.
"Many family businesses are stuck on 'you have to have a family member running it.' But that's not true. You own it. You want your business run by the best person possible," Hutcheson explained.
According to Hutcheson, a family business is comprised of three elements: family, business and ownership. And they are all intertwines. A change in any one part of the system can have an impact on the other parts of the system, he noted.
And while conflicts arise, Hutcheson explained there are some best practices family businesses should follow:
- Have common goals
- Fill key roles with competent people
- Implement financial controls and have strong financial talent
- Develop a family mission statement
- Establish sound governance
- Hold regular family business meetings
- Establish a family council and meet regularly
"The most important thing you can do in a family business is communicate," he said, adding active listening is a key to resolving conflicts.