Association Insights: New Book Offers Survival Keys for Family Businesses

Today’s quick and small commercial printers are living examples of the American dream—the belief in taking control of one’s own destiny and being able to advance oneself and one’s family through ability, initiative, and lots of hard work.

In 2011, 90 percent of all business enterprises in North America were family-owned, accounting for half the output of goods and services produced in the US and nearly two-thirds of total US employment. The family business is at the heart of the American dream, and at the heart of the printing industry.

Even a cursory look at the history of printing companies around the nation will reveal story after story of businesses large and small that were begun as one- or two-person operations, sometimes in a garage or basement, and that grew to become a community fixture and a path to success for succeeding family generations.

Unfortunately, not all family-owned businesses enjoy a record of success. According to the new NAPL book “Livelihood & Legacy”, less than 30 percent make it into the second generation and only about 13 percent to the third. And family printing businesses that have survived into the fourth generation can take pride in the fact that they have been more successful than 97 percent of their family-owned business peers.

How difficult is it to keep a family business going? Research indicates that the average life of the family-owned business is 24 years, equating roughly with the active business life of the founder. Happily, we could cite numerous examples of printing businesses whose dedication and professionalism have assured their survival and prosperity well beyond that milestone, and whose management now includes second and third generation family members.

 

Stumbling Block

But what of those that do not make it? Why do they fail? According to “Livelihood & Legacy”, most businesses have a four-stage lifecycle, and it is the transition from the second to third stage where many stumble. The first two stages, shared by most businesses, are:

• Stage One: Start-Up. The founder/owner has an idea and works to bring it to market. High risk, high energy, a small and committed organization, a high degree of informality. There is no long-range plan—after all, the long term is what will happen tomorrow. “The founder is everywhere at once, with a finger in every pie, making on-the-spot decisions; a doer spending more time with the business than the family.”

• Stage Two: Growth. Increasing sales, a growing organization, and less day-to-day financial pressure characterize the growth stage, as the risks taken in the start-up phase start to pay off. The founder remains the focal point of the business, and hands-on management is still king, but concerns about survival are replaced by more positive issues such as acquiring more plant space and hiring more people.

After stage two, growing businesses reach a fork in the road that separates two paths with two different stages three and four. One leads to coming of age and maturity, the other to decline and demise. As explained in “Livelihood & Legacy”, the key to determining which road is taken is whether the business owners “professionalize” it, i.e.: whether management evolves to meet its changing needs.

Many entrepreneurs tend “to resist such changes because they run counter to the ‘culture’ of the company and the entrepreneur’s personal preferences. For them, professionalization equates with more formality, more policies, more paperwork, less spontaneity.”

What they fail to recognize is that “a larger, more established business presents more complicated management problems than a small one. The systems and methods that worked for a start-up company must evolve to match the changing needs of the organization.” The financial pressure may have lessened, but the management challenges have intensified.

 

On the High Road

It may be difficult for entrepreneurs to adopt more professional approaches to management, but failing to do so “could block the entrance to Stage Three—the start of the ‘high road’ to business success.” The book points out that, “Of all the considerations in professionalizing a business, the development of a formal strategic business plan is both the most important and the most frequently overlooked.”

A business plan is important for two reasons: First, it can position the company within the external business environment to achieve a sustainable competitive advantage. In other words, instead of just reacting to the ups and downs of the marketplace and its customers, it will be prepared to leverage every opportunity and counter every threat.

Second, a plan can identify the internal business issues that must be understood and resolved if it is to establish a solid foundation for future success. Among these, of course, is dealing with any conflict between family interests and business interests, and managing areas where family and business concerns and issues overlap.

Some companies believe they are too small to need a formal business plan, but “Livelihood & Legacy” notes that the size of a business is not a factor in professionalizing it: “A husband-and-wife management team, sitting at the kitchen table, can develop and apply a strategic plan for their business.” And they should.

 

Mitch Evans is managing director of NAQP. Contact him at mevans@napl.org. “Livelihood & Legacy” includes criteria for business plans, ways to address family issues/business issues conflict, and the key elements of transitioning the business from one growth stage to another and from one generation to the next. To learn more, go to www.napl.org, select “Store” and enter “Livelihood” in the search box. Find more information on NAPL MyPRINTResource.com/10006811.

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