Only a third of family-owned businesses make it to the second generation. Some local entrepreneurs have taken steps to make sure their families — and their businesses — survive and thrive.
When Christopher Schneeman graduated from college, he was determined not to follow his father and grandfather into the family business of selling property and casualty insurance.
Schneeman decided he would make his mark by selling health insurance, instead.
‘Just to slide into the family business was really too easy a solution for me — I wanted to have my own thing,’ Schneeman said.
After a few years on his own, Schneeman merged his health insurance agency back into the family business. And in December 2006, that business — SevenHills Benefit Partners in downtown St. Paul — welcomed the fourth generation when 25-year-old Dan Schneeman joined the agency.
Such longevity is noteworthy, business consultants say, because family businesses often are doomed to a much shorter life as relationships among family members become strained.
The Schneemans think one of the keys to success is that each generation has space to go in a new direction. Dan Schneeman, for example, is focusing on selling health insurance to individuals, rather than the employer groups that have been the mainstay for the business.
Still, the numbers suggest that the Schneemans are unusual.
About 30 percent of family-owned businesses survive in the second generation, while just 12 percent are still viable in the third generation, said Joseph Astrachan, a business professor at Kennesaw State University in Georgia. Only 3 percent of family businesses operate at the
fourth-generation level and beyond, said Astrachan, who edits an academic journal called Family Business Review.
Astrachan estimates that family businesses account for more than $5 trillion of the country’s gross domestic product, and employ 62 percent of the U.S. work force.
“People still do not invest time making their families better, having the mystical belief that families are natural and need no care,” Astrachan said. “Because of this, when people have disagreements or conflicts, they find it hard to agree about the business, hard to spend time together, and ultimately find ways of not staying together, which usually involves selling or closing the business.”
Family businesses can fail for a variety of reasons, ranging from a poor business climate and a lack of talent within the family to plain old bad business decisions, said Tom Hubler, a family business consultant in Minneapolis. But in many cases, he said, there’s just too much overlap between the family and the business.
In some businesses, entrepreneurial fathers pour heart and soul into the business, but neglect their parenting responsibilities, Hubler said. That can prompt adult children to go into the family business in search of recognition they didn’t get at home, while fathers who are “playing the back nine,” Hubler said, start expecting those children to provide validation for their sacrifices.
In family businesses where dad’s the boss, Father’s Day can provide a perfect chance to start addressing problems, Hubler said.
“Tension in the business relationship often results from the emotional deficit that accrued in the family between father and kids,” Hubler wrote in a 2006 article on the subject. “Troubled father/son or father/daughter business relationships that make the news are often, I believe, directly related to what has or has not happened in the parent-child relationship.”
Just down the hall from Christopher Schneeman’s health insurance agency in the Landmark Towers, Bill Morrissey says he worries about the problems that can torpedo family businesses.
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