How To Win Where 70 Percent Of Family Businesses Fail

June 12, 2018

  By Christa Fletcher, contributor at The Underground Group

In short:

Growing up, Devin Becker(opens in new tab) didn't aspire to take over his family’s business.

He helped his father Randy(opens in new tab) with the family’s safety supply company -- appropriately titled Becker Safety and Supply(opens in new tab) -- throughout his adolescence in Greeley, Colorado(opens in new tab). But Becker's constant dream was to become a firefighter. 

In 2016, however, his priorities changed.

“I was working 100-hour weeks between firefighting and helping with the business,” Becker told Grow Wire. “After three years, it got to the point that I had to decide which path I wanted to take… I had gotten married, we got a house, and I had to think, ‘What’s best for the family long-term?’"

At 27 years old, Becker quit his firefighting job and joined Becker Safety and Supply full-time as vice president(opens in new tab) under his father. Just one month later, he took on more duties than anticipated when his father was diagnosed with brain cancer. (Randy still serves(opens in new tab) as the company's president. His wife Elesa(opens in new tab) -- aka Devin's mom -- is a 50 percent owner with Randy and has the unofficial title of "corporate matriarch.")

The Becker family is tight-knit: They took this photo on a recent trip to announce that Crimson (Devin's wife, center) is pregnant. (Clockwise from right: Randy, Elesa, Devin, Devin's sister Bradee, her husband CJ, and Crimson)

Becker is part of a growing group(opens in new tab) of millennials taking over family-owned operations from their retirement-age parents. The U.S. will see $10 trillion worth of family-owned and closely-held businesses(opens in new tab) pass to the next generation of owners within seven to 10 years, according to advisory firm EisnerAmper(opens in new tab)

But it isn't always an easy case of simply passing the baton to the next generation. 

According to The Family Firm Institute, only about 30 percent of family businesses survive(opens in new tab) into the second generation, 12 percent are viable into the third generation, and only about 3 percent of all family businesses operate into the fourth generation or beyond.

After two years at the helm of Becker Safety and Supply, Becker advises those considering a similar move to prepare for challenges, especially if your leadership style if different from your predecessor's.

Here are Becker’s tips for others who are taking over their family business or thinking about doing so.

Know -- and explain -- your management style.

Setting expectations is the most critical part of business ownership. Becker's first order of business was showing his team how his management style differed from his father’s.

“[My father and I] have very different management skills, and that was something we quickly had to work on,” Becker said.

The duo used the DISC personality profile(opens in new tab) to dissect their leadership styles. 

“In a DISC assessment, I’m a high ‘D’ person; I like a get it done and ask questions later,” Becker said. “But I’m also a high ‘C,’ which is very detail-oriented. Randy is more like an ‘S.’ He’s people- and relationship-oriented. He always asks about people’s families and how they’re doing before talking about a project.”

Devin Becker says personal identity-seeking was key to his becoming an effective successor to his father Randy.

Becker said he had to grow his soft skills(opens in new tab) during the transition and warns others that patience is essential in the process.

“Don't expect [the transition] to happen overnight,” he said. “It’ll take time to learn everything and for [team and family members] to accept the change. But if you talk with them and are open about the changes, it will be easier for everyone.”

Maximize what you already know about your business.

As a family member, you probably have a basic knowledge of the business already. Use that knowledge to inform where you start and guide your early decisions.

In Becker's case, he had helped with the company since childhood and had a relevant college education, so he was able to immediately turn his efforts toward updating operations. He evaluated existing operations and then added technology to streamline processes and cut costs.

"Inventory control was a big thing for us,” Becker said. “[Now], there's no more shutting down the business for two days for inventory. Warehouse managers now use scanners instead of walking out to the warehouse. Every 90 days there's stock counting(opens in new tab) because we’re a wholesale distributor(opens in new tab) with a retail environment(opens in new tab) where people can come in and shop from our shelves. "

Becker also implemented cloud-based storage(opens in new tab) and new software for all departments. He’ll add ecommerce(opens in new tab) to the company’s site(opens in new tab) next month.

Draw work-life boundaries.

Unlike his father’s generation, Becker found it difficult to get out of “work mode,” he told Grow Wire. In particular, it has been hard to discern when to stop responding to emails -- or to stop working in general.

He advises other young company owners to come up with a plan for separating work and home life(opens in new tab), then set the resulting precedent with family members and team members. This can be especially tough in family-run businesses, where owners usually see family both at home and work. Case in point: Becker’s sister and wife previously worked for his company.

“I’m still trying to find the balance between when to work and when to shut off work and focus on family,” Becker said. “When I’m home with my wife, I want to be home with my wife, not focusing on the business.”

Becker's wife, Crimson, formerly worked at the family company. 

Experts advise pinpointing your boundaries(opens in new tab), or the instances in which work-life crossover really irks you. (Maybe it’s when you’re asked about your personal life while at your desk, or when a colleague calls you after 6 p.m.). Then, tell your colleagues – whom may very well be related to you – where those boundaries lie, all while remembering "work-life balance" isn't really attainable(opens in new tab) at all.

Be humble enough to learn.

Finally, it’s important to remember that taking over a family business is not easy: That’s why 70 percent of family businesses don't survive into the second generation. To be successful, you will need to be humble and be aware of what you don’t know. 

For example, tapping into corporate mentors, taking leadership classes, and joining a network of fellow business owners has helped Becker succeed in his role as VP.

Becker took a weeklong course called EntreLeadership(opens in new tab) and regularly listens to the company’s corresponding podcast(opens in new tab).

“I’ve learned about management over the years through observation, but I also went to a class that helped me put it all together,” he said. The course helped him “learn how to run a business, how to sell and how to take care of [my] team members.”

Becker also seeks advice from business mentors(opens in new tab) and joined Ministry Through Business, a networking group of millennials who have taken over family businesses too.

Becker learned  about leadership from his father but says reaching for other resources was critical to his growth.

He’s on the right track: Psychology experts and business owners alike(opens in new tab) say joining a group(opens in new tab) whose members have similar business challenges is an important way to stave off the emotional trauma that can come with owning a company(opens in new tab).

And of course, Becker has his father. Though officially retired, Randy is always there for support when needed, Becker said.

“My big role is to maintain the same culture my father did as we grow,” he said. “The same values are still there. But my goal now is to bring the company into the future. I see the benefits already.”

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