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University of Massachusetts Amherst

Family Business Center

Today is the Tomorrow You Dreamed About Yesterday

by Ira Bryck

In many an insurance sales pitch, a banking seminar, a lobbying propaganda brochure, there's the ubiquitous statistic "two out of three family businesses fail the transition to the second generation, only 10 percent make it to the third."

One would assume that the family business entrepreneur is no gambler, and will be scared into the purchase of whatever product, service, or consultation is claiming to do their magic and protect them from those severe odds.

In fact, even the scholars who researched family business survival rates admit that the figure is somewhat anecdotal, and "failure" includes selling the business, going public, transitioning to a sole proprietorship; any condition but multiple family members.

In a recent conversation with directors of university family business programs, it was noted that the survival rate for non-family businesses was roughly the same--only one in three. A business of any type rarely lives more than 24 years. So why focus in on the family firm?

When a non-family business goes under, there is disarray and unemployment. People must seek new employment, and there is trickle down through the economy of the debt and failure of that business. But when a family business is no more, it is often a symptom of family conflict and poor planning. Family relationships, which still exist after the lights have been turned off for the last time, are stressed and strained in a way that no bankruptcy ruling can protect you from.

I met a man at a business dinner who told me of a fishing business his grandfather had with a sister many years back. Through some mysterious but dubious circumstances, the sister took control of the business and her branch of the family thrives to this day. The
descendants of the grandfather have lived a resentful and pained legacy for three generations, separated from wealth, family, and community (having moved away in shame and anger) by the poor communication and conduct of their ancestors.

The business pages are full of sibling rivalries, business divorces, and even family business murders. Oftentimes it is not about lack of business or lack of business savvy. It's egos, unresolved hurts and fears, and lack of resolve to reach a resolution. Looking back, one might say "why couldn't they sit down and discuss this?" Looking forward, one often says, "Now that the economy improved, we're not fighting as much, so forget it."

"Today is the tomorrow you dreamed about yesterday." Before one realizes the present is the past, and legacies are cast. You cannot go back in time, but you can learn from history, and from the failings of others. "Proper prior planning prevents piss poor performance." Take the time to improve communication, take risks to break through barriers. Commit to spend the time and energy to think, discuss, create- and sign- that estate plan, that succession plan. Go on that family business retreat, join the UMass Amherst Family Business Center, follow through on the results of that last vote.

As the salesmen like to say "you can't afford not to."

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