In this issue
Studies show that the average American is one paycheck away from being on the streets, but it's not just the average American who can fail financially; wealthy families can fail too. Overspending, too much portfolio risk and lack of communication are among the main reasons families with a net worth of $30 million or more fail.
Savvy families understand that encouraging next-generation entrepreneurship increases the likelihood of the family enterprise continuing into the future. Forward-thinking families go the extra mile to nurture budding family entrepreneurs by providing funding for their ventures.
The Rowntree family of Toronto has established a family financing program to help its rising generation start their own companies. Rowntree Enterprises has transitioned out of its original business—car dealerships—to focus on real estate and private equity investing.
At its core, a mission statement is a compass. It directs and aligns people toward true north. A mission statement crafted by the family can be referenced for guidance when decisions must be made, conflicts resolved or questions answered as family members journey toward success.
However, if the mission statement is not aligned with the family's beliefs, it will not resonate with family members, nor will it double as a compass should there come a time when the path or the journey grows unclear. In other words, the mission statement must be based on a family's shared values.
The Business: J. Walter Becker founded the Ideal Commutator Dresser Company in the kitchen of his mother's Chicago home in 1916. His original product was an abrasive stone used in industrial motor maintenance. Becker moved his company to Sycamore, Ill., in 1924 and a few years later developed another revolutionary product, the screw-on wire connector. The company changed its name to IDEAL Industries Inc. when it became a corporation in 1946.
After building a thriving business, entrepreneurs often hope their companies will stay in the family for generations to come. Yet many business founders, despite planning diligently and gathering recommendations from well-known advisers, find their companies faltering after they relinquish the reins. Why?
Fragmented vs. integrated
Since setting up its Employee Stock Ownership Plan (ESOP) in 1998, Harrisburg, Pa.-based D&H Distributing has seen annual sales grow from $430 million to $3.4 billion. D&H’s third-generation co-presidents, brothers Michael and Dan Schwab, say their ESOP has motivated employees and helped them buy out their relatives. (D&H was the subject of the cover story in the July/August 2016 issue of Family Business Magazine.) Would an ESOP also be a good option for you?
Generation of family ownership: Third.
2015 revenue: $22 million.
Number of employees: 85.
Years with the company: 27.
First job at this company: I worked on the maintenance staff at 14 and during the summers through high school. The first day I had to paint the stone foundation with a toxic, oil-based paint in a cellar with no ventilation. My first adult job was production manager, managing the layout and printing and distribution of the magazine.
My husband works with his family. I work outside the business. I would like some information on how I can best support my husband as an in-law not employed within the family business. Do you have any suggestions?
Your question brings to mind two dear friends, Max and Heather, and their experience in Germany in 1988, a year before the Berlin Wall came down.
Next-generation family business members are feeling confident about their readiness to take over the business, a PwC survey of rising-generation members from around the globe has found. But the investigation also revealed that the next-generation respondents are somewhat less sanguine about their readiness to lead the family.
PwC interviewed 268 "leaders-in-waiting" from 31 countries. The companies represented reported revenues ranging from less than $10 million (21%) to more than $500 million (12%).