Survival of the family business hinges on operational choices

According to the U.S. Small Business Administration, fewer than one-third of family businesses survive the transition from the first generation to the second, and of those, half won’t survive the succession to the third generation.

“The old saying goes, ‘The first generation builds it, the second generation enjoys it, and the third generation destroys it,’” said Rayanna Anderson, director of the Small Business Development Center at Missouri State University.

Sometimes it’s a change in the business environment that makes a company no longer viable, Anderson noted, though she said there are other reasons businesses don’t survive to the fourth generation.

“Often, that third generation finds it very difficult to sustain the business,” Anderson said. “They weren’t the originators; often, they don’t know all the history, and they can come in with such a different background than the original owners that it’s difficult.”

There are, however, some notable exceptions – and the families behind those say the key to success lies in treating the family venture like any other business, instead of a family activity.

Talent and hard work

Wil Fischer Cos. began in 1966 as a five-employee Budweiser distributor run by Wil and Vera Fischer. More than 40 years later, the company employs 80, including their son, CEO Jeff Gower, and their grandson, Jeffrey Gower. In 2006, the company sold 2.5 million cases of beverages. Vera Fischer still serves as chairman of the company board.

“For a family business to succeed and run as efficiently as any other business, the family members that run the business have to be as talented as the people you’d find outside the family,” Jeff Gower said. “If they’re not talented enough to meet the demands, the business falters. When you see the family businesses that have succeeded, they have chosen the people in the family that have the talent, and it shows.”

Plaza Shoe Store, 1848 S. Glenstone Ave., is in its third generation of family ownership. Owner Cathy Belk took over operations from her father, Robert Lee, in mid-2006. Lee started the business with his parents, Oscar and Norene Lee, in 1958.

“At one time, we had eight shoe stores; in the 80s, with the changing marketplace, we had tried to change the wrong way,” Belk said. “Now, we’re back to how we started – one store, offering good shoes at a fair price with custom fitting.”

She said that many times, family businesses fail because younger generations aren’t cut out to run a company.

“Many times, the later generations may have a sense of entitlement – they feel that they shouldn’t have to work as hard,” Belk said. “My philosophy is that the business means more than my personal wealth. I put everything into it so I’ll have a livelihood later in life.”

Belk also noted that maintaining a long-standing family business is more difficult than simply achieving business growth, and the SBDC’s Anderson concurred.

“It’s all about succession planning,” Anderson said. “Just like any small business, it’s difficult to sustain a business over a long period of time, because everything changes, and that continuity is hard to accomplish.”

Importance of family

Bolivar law firm Douglas, Haun & Heidemann PC is now in its fourth generation of family involvement.

Thomas H. Douglas started the firm in 1912, and his son, Elvin, joined the firm in 1932. Kerry Douglas, Elvin’s son and the firm’s current senior member, joined in 1972, and Kerry’s son, Pat, joined in 1999 and became a shareholder in 2001.

Kerry Douglas said the firm’s small-town roots have made it easier to appreciate its family history.

“I think with that more rural setting, you end up with a lot of clients that have been served by our family – I have people come in that worked with my granddad,” Douglas said. “Pat grew up in the community, he knows the people well, and he decided he wanted to serve the same clientele that we’ve been serving since 1912.”

Jared Enterprises Inc., is in its third generation of family leadership. The company, which started in 1990 as CRW Properties Inc., is an outgrowth of Clarence Wheeler’s Consumers Supermarkets chain, which once had 38 stores in four states.

Wheeler’s son-in-law, company President and CEO Jerry Jared, took the reins of the company in 1997 when Wheeler died. The company – which changed its name to Jared Enterprises in 2006 – now includes sons Curtis, who serves as executive vice president and chief operating officer, and Andy, the company’s graphic design manager. Curtis’ sister, Cindy Jared-Smith, left the company last year to raise children.

Curtis Jared said the company’s family feel is the key to its ability to grow and change. The former grocery store business now operates 25 Cody’s Convenience Store locations with more than 275 employees.

“It’s not your typical corporate environment; family businesses tend to be more open, so it’s easier to have the communication that you need to make decisions (quickly),” Jared said. “Sometimes the corporate ladder is too tall to climb, and by the time you get to the top to get your answer, it’s too late.”

MSU’s Anderson said flexibility is key for any business to achieve longevity, but it can be especially difficult in a family company.

“A lot of times, you have a family member there who says, ‘We’ve always done it this way,’” she said. “The family has to agree that the next generation is going to bring their own views and talents in, and that changeover can be difficult.”

Wil Fischer’s President Jeffrey Gower added that being part of the company founded by his grandparents creates a special connection.

“I think it adds a degree of responsibility that doesn’t typically exist with a business,” Gower said. “There’s an added desire to succeed, to honor the work that has gone before you. It makes it more important, more personal.”