The Third-Generation Curse: Why Family Businesses Struggle to Survive
Family businesses can be incredibly successful, but they also have a higher likelihood of failing after the third generation.
According to research, only about 12% of family businesses make it to the third generation, and even fewer make it to the fourth generation and beyond.
So why do family businesses fail after the third generation? There are several reasons:
Lack of Planning: One of the main reasons family businesses fail after the third generation is a lack of proper planning. As the business grows and more family members become involved, there is often a lack of communication and planning about how the business will be managed and who will be responsible for what. This can lead to conflict and confusion, which can ultimately cause the business to fail.
Entitlement: Another common reason for family business failure is entitlement. As the business grows and becomes more successful, family members may start to feel entitled to certain privileges or positions within the company. This can lead to resentment and conflict, as other family members may feel that they are being treated unfairly.
Lack of Innovation: Family businesses that have been around for several generations may become complacent and resistant to change. This can be a recipe for disaster, as competitors who are more innovative and adaptable may outperform them in the market.
Difficulty in Separating Family and Business: Another challenge that family businesses face is the difficulty in separating family and business. Family members may bring their personal problems and conflicts into the workplace, which can negatively affect the business.
Succession Planning: Succession planning is another critical factor that can determine the success or failure of a family business. If there is no clear plan for who will take over the business when the current generation retires or passes away, it can lead to confusion and conflict, ultimately causing the business to fail.
In conclusion, family businesses can be incredibly successful, but they require careful planning, communication, and a willingness to adapt and innovate.
Without these factors, family businesses can quickly fall apart, especially after the third generation.
It is essential to remember that a family business is not just a business, but a family legacy that should be treated with respect and care to ensure its longevity.