70% of 2nd generation and 88% of 3rd generation Family Owned Businesses (FOBs) fail. Why does this happen and what are some of the factors that contribute to this common outcome? Family owned businesses tend to have a more inefficient and therefore ineffective management style than other types of businesses. Often, there’s a deference to the oldest member of the family, and when the founder exits the business, his or her internal knowledge isn’t passed down to the 2nd and 3rd generation. This can create huge blind spots in managing the business.
Family peace is often given greater weight than sound business judgement. Keeping everyone in the family happy can create a reluctance to addressing the true risks and threats to the company as well as an inability to see greater opportunities for the business.
These are just a couple of factors that can put a Family Owned Business at risk. If you’d like to learn more and get an objective set of eyes on your FOB, let’s talk!