The Family Business: Celebrating America’s Legacy – Rick Andrade

The invention is as old as humanity. It’s older than religion, older than the pyramids, the great wall of China, older than the first written word. When exactly? Nobody knows. In fact, from the first unrecorded day in history when humans first gathered in markets to trade & sell food, furs, and sea shells on a string, we were ‘in business,’ and we never looked back!

It’s a fascinating story on American soil too. Mansel Blackford, professor of History at Ohio State pulled it all together well for us in his book A History of Small Business in America. And it makes perfect sense in its simplest expression.

Essentially, from our inception and before in colonial times we hand-made what we needed and bought from small merchant importers all the rest.

A growing westward expansion then grew demand from farmers and ranchers and as small towns popped up across the frontier, so arrived the entrepreneurs to fill the demand. Among the most significant early businesses born of Manifest Destiny was the American Country Store.

These were, for the most part family run 7-11 stores, and anchor tenants joined by barbers, trade-smiths, hoteliers, saloon owners, bankers, and all the rest. And the key common feature most shared among them we often forget. Nearly all were family run operations.

It was this unrelenting expansion that would later become the origin and growth-driver for all entrepreneurial business owners across America. Opportunity was there for the taking. And so did follow the idyllic birth of the American Dream, and America’s Family Business legacy.

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By definition a family-owned business in America is one that has 2 or more family members at work there. Most are small businesses with humble goals, at least in the beginning. Put food on the table.

When I was a kid my forever handyman dad, for example (to earn extra money) had a landscaping company, a tree service company and a 20 x 15sft spot we rented every Sunday at the local outdoor flea market. If they cleared the snow in winter that weekend, we were there. We sold refurbished bicycles, lawnmowers, and anything else we could buy and repair from local junk dealers the week earlier.

It was altogether synonymous with hard work and no pay. Yet if not for the food, clothing, shelter, education, personal care and security my family provided me as a result, I may not have made better of myself and graduated from UCLA with a BA and MBA degrees and here now to help family businesses in America succeed. Mission accomplished dad!

Looking back decades later I’m grateful to have the early experience watching our family of six manage real customers, real schedules, real school, work and play commitments. Time management, team management, resource management and money management; All lessons learned at an early age in ours and any family business. You worked hard and pitched in where you were needed, and together you survived. No questions asked.

Today, as a business Advisor I still use the fundamentals I learned from my dad, but more importantly it helped me understand the people and relate to the pressures of running a family business day-in day-out, and why they do it.

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Did you know that family-owned businesses in America employ 60% of the US workforce, create 78% of all new jobs, and generate 64% of America’s Gross Domestic Product (GDP)? Those are some serious numbers!

And that’s what this is all about. Because the ‘family business’ needs some help and a wake-up call or else our “Country Stores,” America’s economic lifeblood, and the horse-power they provide to local communities across the nation may close for good.

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In their recent 2023 annual family business outlook survey by the global crisis communications firm, The Edelman Trust Institute, they found:

Only 40% of family business owners say they and their families will be better off in 5-years, a 10-point decline from 2022

And worse, only 36% are more optimistic about their future.

Yikes! So why the staggering loss of confidence?

It turns out, post-Covid economic and social anxieties are the cause. A lack of civility and weakening social relations the Edelman report revealed. These eat away at the heart & soul of America’s family businesses whose trust in the economic and social outlook in America is declining and deflating their long-term confidence.

And yet when asked about why they stay in business, according to the The Family Enterprise USA 2023 Annual Family Business Survey:

79% said their family business is important because it’s part of the “family legacy,” which is coincidently also a part of America’s family legacy, and a beacon to the entrepreneurial spirit of dreamers around the globe.

However, according to research by the U.S. Small Business Administration(SBA)’s non-profit SCORE business advisory team:

only 30% of family-owned businesses survive from the first to the second generation

And that’s because the odds are not in their favor. 20% of new businesses don’t survive the first year, and 50% don’t survive 5 years.

So. How can we help the family business survive the future?

Make no mistake some of the pain and pessimism is definitely self-inflicted. In my career I’ve discovered that many family businesses suffer from ‘island mentality,’ which is to say not easily accepting outside help. There are many reasons and high emotions behind this thinking, but the results are typically the same. Decline.

Many get their business heads stuck in the ground, and drag their feet when it comes time for technology and management team upgrades. According to The Family Business Center of Loyola in Chicago;

“Many best practices may well be at odds with the fundamental nature of most family

Companies.”

These things are expensive and disruptive, they argue. And family businesses in particular tend to avoid them as unneeded expenditures. That is until something goes wrong.

Is it worth it?

Well. It depends. If you get it right, it’s Boom, Boom, Boom, long term baby!

Love it or hate it… Did you know that Walmart’s annual sales ($573B) totaled 2.25% of our country’s GDP last year? The company employs 1.6 million workers in the USA. That’s a really big family business, or rather was.

Still. It’s hard to imagine Sam Walton started the company as a single location brick & mortar variety goods (country store) retailer back in 1945, with a $20,000 loan from his father-in-law in Arkansas! An astronomical success story, one that underscores the meaning of making your American dream come true, and a bigtime family business success.

The big distinction that pushed Walmart over the hump in the early days was their willingness to embrace newer logistics and inventory technologies or else. Decline. This enabled them to avoid the game-ending pitfalls that many more-stubborn family island businesses fall prey to when trying to scale up.

At the same time, building and owning something profitable that can sustain a generation of family prosperity is the leading driver behind entrepreneurs like Sam Walton who stick it out.

Make no mistake mom & pop shops are still the fledgling future of American commerce and employment. And we won’t succeed without them.

Did you know there are more than 1 million husband & wife businesses right now across America according to the SBA.

But if they want to grow big and prosper in the longer term according to the 2023 SBA/SCORE Family Business survey and other experts, family businesses need to help themselves as early as possible in their lifecycle, before it’s too late.

Here are a few important practices most family business owners could do now to improve their chances of success, for example:

Open the back office – Embrace new technologies top to bottom. Just because something “works” doesn’t mean it’s the most efficient or profitable way

Hire a CFO or VP of Finance asap – This is often overlooked. As an M&A advisor we see higher valuations and better financing terms for small companies with sound financial practices

Develop better governance – Create an advisory board that includes outside directors with no skin in the game who are well qualified to provide advice for the challenges of a growing business

Focus on the next generation – Ensure that family members committed to the company’s future serve on boards and committees to nurture and grow their business expertise and management skills

Act small, think big – Be more customer and employee-focused. 74% of family-owned firms report stronger values and culture than non-family-owned businesses. So, use that to emphasize your commitment to each customer and each employee, each day. This will strengthen the community bond between employees, customers and family

Giving hope and a helping hand

Lastly, it’s not all bad news if you know where to look. Despite the headwinds, according to the Economic Innovation Group (EIG), a non-profit public policy research firm, there’s been “a huge surge in the number of new business applications” in the past two years, much greater than pre-pandemic levels.

And to help smooth the way for these fledgling family entrepreneurs, and all small businesses, members of Congress decided to step up as well.

Last December 2022, a bipartisan Congressional Family Business Caucus was formed to connect Members of Congress with family businesses in their district/home states to promote an open productive dialog and develop solutions to assist local businesses. [Click on the link to find your representative.]

Their goal, along with the SBA and SCORE, is to help support and promote the important role of family businesses by reducing government red-tape and put a spotlight on “workforce issues, tax policy, economic issues, and community development,” they say.

It remains to be seen how effective government can be these days. But as a family business advisor I welcome any help if it works!

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But in my view in order to slow the growing pessimism and decline of America’s family businesses it will take a village, so to speak. And that village is your home town USA. Because the real help must start by readjusting our purchasing behavior.

We control the destiny of small family businesses in America, not our government nor any other. But no family business can survive nor learn to engage any “Best Practices” if we don’t provide the most important part first: paying customers.

So, let’s give it some thought this holiday season. Think about the impact you’ve read about here, and the responsibility we each have to preserve and strengthen our family businesses. They are vital threads that founded the fabric of our proud American culture and legacy.

Try to shop locally in person and on-line this holiday season. It can make or break the future for our children and our future Country Stores. Because we’re all in this together, right?

And remember, when you shop locally chances are the smiling face looking back at you from behind the counter is a welcoming family business owner whose entrepreneurial spirit still has mouths to feed, just like you!

Happy Holidays to all.

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For a deeper dive into Family Business structure and leadership best practices, the University of Loyola Family Business Center published these information/education guideline white papers that can help you navigate around pending pitfalls. Print them, read them, learn from them, like I did:

Managing Relationships (PDF)
Guidelines for Family Business Boards of Directors (PDF)
Leadership (PDF)
Strategy / Finance (PDF)

For more insights and assistance with your family business check out these resources I used:

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Fun facts from Family Enterprise USA

91% of family businesses kept jobs during the recent high-inflation period
46% pay “above average” wages and benefits
72% have non-family “generational employees” working there
82% of survey respondent companies donated funds to local charities

Rick Andrade