Note: Thomas Deans is the author of Every Family’s Business which the NY Times has listed as one of the ten books every business owner should read. Tom has been an owner of a very successful family business and currently spends much of his time speaking in the U.S. and Canada to groups of business owners.
DSF: Why should those of us who are not in family businesses care about them?
TWD: Family businesses are one of the most pervasive phenomena in our society. Probably far more than one-half of all businesses in the U.S. are family enterprises. Thirty-five percent of the S&P 500 are family businesses and over 40% of the Fortune 400 acquired their wealth by association with a family business. Family businesses have a tremendous impact on our society and economy.
DSF: What is the major problem with family businesses?
TWD: Family businesses are among the most successful enterprises in the country. Some academics argue that they outperform non-family businesses and they might be right. However, family businesses don’t last as long. They tend to die with the founder. Only 30% make it to the second generation. Of the rest, only about one-half are sold. This results in a great waste of financial and emotional capital. The problem is that you can’t run a successful business like a family and you can’t run a family like a business. Family businesses tend to conflate the two. Too many founders measure their legacy by the success and continued family ownership of their business. Rather, they should measure their legacy by the success of their family. This might mean continued business ownership or not depending on circumstances.
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