When family firms are compared favorably with non-family companies, a point often cited is family business owners' "patient capital." While many corporations are focused on maximizing shareholder profits quarter to quarter, family business owners are more willing to reinvest in the business for the future.
Long-lasting family firms—those in existence for a century or more—are praised for having the foresight to diversify and reinvent themselves. They exit businesses that are no longer sustainable and enter more fruitful ones. Folkes Holdings, based in the U.K. and South Africa, started in 1697 by making chain mail and swords; today, the company invests in real estate and has holdings in agriculture, tourism and engineering. Menasha Corporation of Neenah, Wis., began as a maker of wooden pails in 1852; over the years, the company evolved into packaging, logistics and marketing.
Too few people recognize that the notion of "family enterprise longevity" extends beyond management of the legacy operating company. Many families continue to own their company although no family member works there. Other families that have sold their businesses remain together as an investor group.
It's important to understand that if you envision your family enterprise lasting a century or more, you must apply long-term thinking not just to your business, but also to your family. That means considering how today's decisions on a range of matters will affect the family in the future. Is it wise to create trust terms that restrict flexibility? Will your estate plan create dissent among your heirs?
Family members will need a whole lot of training if they intend to continue in business together. All owners must know how to read a balance sheet. They must understand concepts such as valuation discounts for business interests. They must know how to keep emotions rooted in family history out of discussions of today's agenda.
Most thriving multigenerational business families have regular family meetings and gatherings to discuss important matters as well as to build connections among cousins who live far from each other. Many of these families have a mission statement, a vision statement and a set of policies governing how potentially sticky situations will be addressed. They regularly review these documents to determine whether revisions are required. They recognize that family values are likely to evolve over time. (Consider the Rockefeller family, who once owned Standard Oil and are now environmentalists.)
None of this is easy. Making it all happen requires a considerable investment of time and money. Some family members who work outside the business will need to use their vacation time to travel to family meetings. Conflict will arise and will need to be managed.
In other words, if you aspire to leave an entrepreneurial legacy that lasts for generations, your work must involve more than building a viable business. You must also build a cohesive family.
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