According to well established research, 90% of all startups fail (including family businesses). Of the family businesses that survive the startup phase, 70% of them fail or never make it through to the next generation.
The reasons for the high failure rates are diverse. There are however common traits that the successful family businesses avoid that the contemporaries don’t.
1. Hiring family members even if they are not qualified
This is a common mistake especially when it comes to children of the founder. The successful family brands like the Walmarts, Mars, Ford Motors and (locally) DOMOD, focus on grooming the next generation of family leaders with the right skills to take successfully over the family business.
2. Failing to involve a board and non-family mentors/advisers
Bringing in highly experienced/qualified advisers and mentors augments the family’s expertise, strengthens business strategy and provides a basis for solid capacity building and succession planning for the business.
3. Not implementing the right systems and structures
This is somehow tied to #1 and #2. Family members typically struggle to separate the business from themselves. There is typically poor or no accountability and no controls to protect the business from implications of poor performance and/or misappropriation of company finances by family members.