How to Prevent Your Family-Owned Business from Failing

Studies show that only one-in-four family-owned companies make it to the second generation, and only one-in-eighteen make it to the third generation.

Most family-owned companies hold small and medium-sized markets. It has also been shown that 62.7% of small companies fail within six years.

Why is there a very high rate of failure in family-owned companies? Knowing the causes of failure may give you an idea to prevent this from happening and will allow your business to succeed and stay in your family's possession in the years to come.

The following are tips on how to prevent your family owned company from failing during the next successive generations:

Tip No.1 - Make a vision and a mission statement

Everything starts with a mission and a vision. Without a mission and a vision statement all endeavors will be deemed as empty, hollow and useless. You will have to sit down with your family members (who may be board members as well) in order to determine what are the vision and the mission of the company or the family corporation. The success of an organization is a reflection of their mission and their vision statement.

A mission statement defines the purpose of the organization. It seeks to answer the question "Why we exist." It "defines the core purpose of the organization - why it exists. The mission examines the "raison d'etre" for the organization beyond simply increasing shareholder wealth, and reflects employees' motivations for engaging in the company's work. Effective missions are inspiring, long-term in nature, and easily understood and communicated." A mission statement is the one that gives life and meaning to everything that is being done and will be done in the organization. The mission statement should be written and displayed within company premises. It should include up during board meeting, staff meetings and employees meeting. Family members holding positions in the company, the management team, middle management and the employees must align themselves and what they do with the mission statement checking to see if the day to day goals have been in accordance to the mission statement.