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
Our cover subjects for this issue are the Schwab family, who instituted an Employee Stock Ownership Plan (ESOP) in their company, Harrisburg, Pa.-based D&H Distributing Co. The ESOP not only funded the buyout of some family owners but also has motivated D&H's employees, leading to exponential revenue increases since 1998, when the plan was put in place, the Schwabs say.
A career spent in Hawaii working with rare and precious gems to make beautiful jewelry might sound like paradise to many people. For brothers Gale and Flint Carpenter of Big Island Jewelers in Kailua Kona, Hawaii, it's been a way of life since the business was founded in 1983.
Now both brothers are approaching retirement—Gale is 59 and Flint is 66—and they've begun turning over the business to Gale's son Chance Carpenter, 28, in what is planned as a multi-year process.
Many owners of family businesses treat employees like family members. The Schwab family takes the concept a step further by providing employees with an ownership stake in their company, D&H Distributing, a technology distributor based in Harrisburg, Pa. Eighteen years ago, the family established an Employee Stock Ownership Plan (ESOP), and they report that the effect on the family company has been very positive.