The first generation founds the business. The second generation builds it. And the third generation ruins it. This sounds harsh, but consider that a scant three in ten businesses make it to the second generation. A miniscule one in ten of these makes it through the third. David Lively looks at the steps family business can take to avoid this fate.
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There are four steps family businesses climb to become significant, fully actualized players in the home furnishings game.
The Family Business Series by David Lively
There was no logical reason their business should have survived. They were located in a tough market, going head to head with big box stores who had big bucks. Their location, once prime, was now on the edge of town. They lived through party lines and pulse dialing, they delivered furniture before GPS and cell phones. Dad ran the store after Grandpa retired. Now Junior is running the show. They live in homes mortgaged by bank notes, wake up in the middle of the night in a cold sweat wondering how to meet payroll, yet awaken each morning to go to work with a smile to face another day. They sacrificed reasonable salaries and endured endless unappreciated hours to see the company grow.
They survived every recession, depression, aggression and discretion in their community for the past 50 years, but it looked like succession would kill them. Does this sound like a familiar story?
Family pride, tradition and unity often allow family businesses to outperform larger, better-capitalized companies in their field – sometimes for generations. Painfully, most family businesses do not last beyond the founding generation. Those who do often become living proof of the maxim: The first generation founds the business. The second generation builds it. And the third generation ruins it.
This sounds harsh, but consider that a scant three in ten businesses make it to the second generation. A miniscule one in ten of these makes it through the third.
Families are complicated. Businesses are complicated. The idea of combining the two with the competitive, dynamic nature of an entrepreneur produces an environment that often works against survival. Many owners/President/CEOs are “seat of the pants” leaders. Charisma, determination, and plain hard work typically trump policy, procedure, and leadership development. By making themselves indispensable they fail to train competent next-generation leaders. The family is discouraged from speaking openly. Tough decisions are avoided to protect the family peace. The absence of open conflict creates a false sense of well being, while sharks lurk just beneath the surface where tensions build.
This lifetime of sacrifice and hard work unintentionally leaves legacies of ticking time bombs just waiting to be unleashed on the under-prepared, under-trained, and unknowing next generation. Adding to the muddled mess are the mindsets and worldviews held by store owner-managers at various ages and stages in the game. Consider each of these stages and where you may be located in the process:
• Survival: Measured by how long you can KEEP the company.
• Security: Measured by how much you can TAKE from the company.
• Success: Measured by what you can SHARE with the organization.
• Significance: Measured by what you can GIVE to the community.
Stage #1: Survival
The first stage represents a survivalist mentality in a reactionary business cycle. Companies that approach business as a survivor seldom move beyond seeing life as a series of tragedies and hardships to be endured.
Here are some traits of companies operating in the survival frame of mind:
Worldview: Business is one struggle after another. It is meant to be endured, not enjoyed. The odds of survival are slim.
Company Image: We are survivors but not market leaders. We rarely get ahead in life. Bad things always happen to us. We are the victims of the economic downturn. We are barely holding on. We can’t survive on our own. We will always be wishing for the next profitable month. At best, we hope that someone gives us an idea that carries the month.
Customer Relationships: Customers are out to get us so we must always be on guard. We must take what we can get from customers because that’s what they are trying to do to us. Customers always do us wrong. Although we want to avoid them, we always attract the wrong type of customers.
• It’s all about us.
• We look out for number one.
• Live for today’s promotion.
• No plans for the future.
• Take business as it comes.
• Never able to get ahead.
• Fear and insecurity rule the day.
• Always facing some new crisis.
• Thrown off balance by the slightest adversity.
Mottos and Repeated Phrases:
• “If we can just make it another day.”
• “We’re hanging in there.”
• “You better get yours before someone else does.”
• “Fate determines my future.”
When companies transition from survival into security, they’ll enjoy a more stable frame of mind. This takes time and fortitude. Usually, the focal point of this shift centers on their job and family. The company is able to pay enough to keep employees and provides the necessities for the families. It is through this INCREASE that greater security is achieved.
Stage #2: Security
Security is a place where companies thrive and people can enjoy the fruit of their labor. It is a great place to raise children and have a happy life. This is the typical American home with 2.5 kids, a picket fence, an attached garage, and a dog. While people who live here may not see themselves as being motivated by fear, a sense of greater security is definitely what drives them. For this reason, most decisions in life are evaluated by the amount of risk involved. If anything threatens the security they have worked so hard to achieve, it is usually discounted outright.
Worldview: Life is a challenge but with hard work, you can pay your bills and have a happy life. There are rewards for those who stay the course and remain steady. As long as my needs are met, I’m OK. We’re not like the rich people who got ahead by taking from the little guy.
Company Image: We are hard workers. We may not be a Top 100 chain, but at least we’re not in jeopardy of going broke. We are not all that driven but we are not all that lazy, either. We aren’t saints, but we’re not criminal. We root for the underdog, because we see ourselves in him. Our company caters to the common, ordinary person.
Customer Relationships: Customers are trustworthy if they act like me. We don’t do well with those farmers from the countryside, or those thugs on the street corner, or those guys on Wall Street. The customers we have are good enough for us. We don’t want to change our policies or store hours or procedures to be attractive to a larger audience. We sacrifice a lot for our customers - even though they don’t appreciate us like they should.
• Paying off lines of credit, debt, and retirement are the ultimate goals in business.
• Doesn’t take risks.
• Sees the company as a way to pay the bills and that’s it.
• Has at least one obsessive hobby for enjoyment and self-worth.
• Does not invest back into the business, looks for “the end of the road” daily. This shows up in dated displays, worn carpet, and old technology.
Mottos and Repeated Phrases:
• “That will never work.”
• “A penny saved is a penny earned.”
• “Play it safe, son.”
• “A bird in the hand is worth two in the bush.”
Stage #3: Success
Most companies stop at security. They enjoy the benefits gained at that level that includes the necessities of life, an above average income and a typical family. Although this is a good thing for business people, there are those who sense a need to go further and do more. They’re not satisfied with the status quo. They need to move from security to success.
Success has little to do with the amount of money a company makes, the accumulation of possessions or the prestige of a position. Former NFL coach Tony Dungy said it best. “Success,” he said, “is when someone reaches their full potential based upon their God-given gifts.” Companies that transition from security to success aren’t content simply working at the current pace. They are led by people who work on themselves! They see the value in company development. They understand their own self-worth and recognize their opportunities. Taking a few steps on faith, these companies move forward into areas where the only thing that holds them back is their own desires and imagination.
Moving from security to success is never easy. It takes risk. However, the companies who make this move are enthralled with the question, “What if?” What if I would step out? What if we push harder? What if we would work a little more? What if we would use all our tools?
People who know themselves well and have confidence enough to use all their talent to the fullest lead successful companies. These companies focus on seeing the bigger pictures and dream bigger dreams. They are risk takers in every walk of life. One day in the future, when they look back on their lives, they are going to know that they gave it their all. As John Wesley said, “I want to die exhausted.”
Worldview: Life is to be enjoyed. It is an adventure! We’ll never know when an opportunity will arise, so keep your eyes open.
Company Image: Our team is gifted. We have a lot to offer. We have multifaceted interests and can serve just about anyone. Sure, we have made a few mistakes in life but that has never held us back from trying something again. Sooner or later, we know we will succeed.
Customer Relationships: We sell so many different people, that we can’t count them all! We have a lot of customers. Some are like close friends, others are business associates but we enjoy them all. We love our family members, and most of our company’s hard work is to leave them something when we are gone. We teach our children the value of living right, giving it your all, the importance of relationships, how to be successful and handle money.
• Sees value in people
• Positive and optimistic
• Prepares for the future
• Looks for opportunities
• Has financial investments
• Has a career and not just a job
• Knows what he/she is good at
• Enjoys passing knowledge to others - especially younger people
Mottos and Repeated Phrases:
• “I can do that!”
• “Tell me your name."
• “What do you do for a living?”
• “How can I help?”
• “Go for it!”
• “I have an opportunity.”
• “Life is like a box of chocolates...” -Forest Gump
Stage #4: Significance
The final stage is significance. Many people in the United States (especially baby boomers) have tasted success (in the world’s perspective). However, millions of them still don’t feel significant.
Significance is defined as, “the quality of having importance or being regarded as having great meaning.” Rick Warren popularized the word “purpose” to describe a significant life. Whatever word you use, humanity is searching for more out of life than what material possessions and achievements can provide. We all need something that makes life worth living, something that will give us self-worth, something that says we have meaning and purpose in life. What we are searching for is significance.
Companies can reach this point in their life cycles just like individuals can. As long as you are willing to become a giver, you can lead a significant organization. The measurement of true purpose is found in how much an organization gives
Worldview: Life has been good to us and we want to give back. Our company can make a difference. Life is not about just money. Other people need us and we must help them.
Company Image: Our company has resources. We are capable of using them. We desire to make our community better.
Customer Relationships: We have healthy relationships with many customers because we don’t live just for ourselves. We try and serve others. We don’t need to “sell” people, because we serve them.
Eight Techniques to boost profit in tough times
• Nothing to prove
• Wise and insightful
• Doesn’t need a spotlight or a public victory to feel worthy
• Doesn’t always have to sit at the head of the table
Mottos and Repeated Phrases
• “How can we help?”
• “It’s really not me.”
• “We have a great team.”
• “We are very fortunate.”
• “Don’t mention our name.”
Your company has a personality as unique as the people who work there. When a Significant-driven leader works with a Survivalist son, there will be fireworks. When a Successful niece manages the store for a Secure aunt, there will be setbacks. But when the family shares a vision for Significance, there will be victory. The family system is emotionally based, with an emphasis on loyalty and the care for family members. The business system is task based, with an emphasis on performance and results. When these two systems along with unique personalities overlap on the road from survival to significance, fireworks, setbacks, and victories will coexist. Wherever you find you are in this process, make a commitment to move to the next level.
David Lively, partner at The Lively Merchant, has over 20 years hands-on experience in the home furnishings industry, from the warehouse to the sales floor to the boardroom. He has walked the walk and talked the talk from the family-owned, single-site store to the multi-state, multi-million dollar operation; from sales training to computer programming; from warehouse construction and operations to financial management; from new store construction to complete renovation. Twice named to the "Beyond the Top 100" list of independent retailers and 1997 "Ohio Retailer of the Year," David's wisdom was won on the front lines of a furniture store and his battle scars have given him compassion for counseling today's retail warrior. David’s experience has led him to address the issues of the transfer of authority, responsibility and wealth from one furniture store generation to the next. Four out of five family-owned furniture stores are still led by their founder, and 40% of them will change hands in the next five years. The surviving legacy of your family business depends on your plan for transition, and David has developed a system for helping to identify goals, strengths and opportunities during this crucial time.
Read more of David Lively’s articles for family furniture businesses on the furninfo.com website. You can reach David by email at davidL@furninfo.com.
David Lively, partner at The Lively Merchant, has over 20 years hands-on experience in the home furnishings industry, from the warehouse to the sales floor to the boardroom. He has walked the walk and talked the talk from the family-owned, single-site store to the multi-state, multi-million dollar operation; from sales training to computer programming; from warehouse construction and operations to financial management; from new store construction to complete renovation. Twice named to the "Beyond the Top 100" list of independent retailers and 1997 "Ohio Retailer of the Year," David's wisdom was won on the front lines of a furniture store and his battle scars have given him compassion for counseling today's retail warrior. David’s experience has led him to address the issues of the transfer of authority, responsibility and wealth from one furniture store generation to the next. The surviving legacy of your family business depends on your plan for transition, and David has developed a system for helping to identify goals, strengths and opportunities during this crucial time.
Read more of David Lively’s articles for family furniture businesses on the furninfo.com website. You can reach David by calling 740.415.3192 or email him at davidL@furninfo.com. David has offered free phone consultations to any FURNITURE WORLD readers who would like to talk about topics related to family business transition.
View all articles by David Lively