First of the 3 Elements needed for a Sustainable Family Business
Written for Farm Futures and originally published at in their Jan/Feb 2025 issue.
There is an adage. The first generation starts it, the second builds it and the third generation loses it. A variation of this saying is in almost all cultures, some going back several thousand years. Sustaining a family business is hard. Clients have told me it's harder than starting a family business. I believe it.
When we initially ask a new client about their concerns about sustaining the family business, we often hear concerns about the business climate or estate taxes. These are important and should be part of a succession plan, but do they get too much attention?
A sustainable family business has three elements, so let's talk about the first of them in this and subsequent articles.
Intentional Unity
Family businesses either thrive or fail based on how the family and the business sustain unity over generations. In the early years, unity isn't usually a challenge but over time, siblings grow into adults, marry, and find their place in life and work. People chart their own courses, so families moving apart over time is the most natural progression. This natural progression doesn't help sustain the business.
Yet, over time, unity is critical for running a business together and owning assets together. Unity in a family business is harder than unity in a non-family owned business. Why? Because in a non-family business the board of directors or CEO can decide (set the vision, set compensation, etc) and either employees follow through or find employment elsewhere.
In a family business, family brings another layer of complexity (and strength). So often, there are blurred lines between where the family roles end and business needs begin. It takes intentional effort to create clarity and agreement on a host of topics to stay unified.
Unity is as essential and needs to be as intentional as planting the crop or managing the finances. Let's look at some areas to focus on for building family business unity.
First some definitions.
Unity is Not:
- Unity doesn't mean that everyone always agrees with each other on every topic.
- Unity is not a full consensus on everything.
- Unity doesn't mean that everyone gets along, all the time.
- Unity doesn't mean family members are each other's best friends.
- Unity is not always equality. Equal pay, equal ownership, equal responsibilities.
Unity Is:
- Dealing with emotional issues before emotions are the only issue.
- Asking for everyone's perspective and talking about it, even if you don't want to hear it.
- Getting good at using conflict to debate topics and then produce better results.
- Once debated, agree on a course of action and get onboard with the decision.
- Having each other's back, when the chips are down. You don't even have to ask.
- Agreeing on clear expectations for roles.
- Setting clear compensation standards.
- Setting clear expectations of how family members treat each other.
- Agreeing, well in advance, how the next generation enters the business as workers and owners.
- Agreeing well in advance, how the Sr. Generation exits their role.
- Agreeing on a clear vision for the business. What does success look like?
- Spending time together, not related to work, and building personal connects.
When you think about failed family businesses, was it an estate tax bill that sunk the farm or a lack of unity? Is the farm economy sinking a farm or disunity and people not getting along? Unity also makes estate planning and navigating business climates much easier than starting from a position of disunity.
Unity, over generations, might be the number one reason why family businesses are sustainable.
Our experience as succession advisors certainly lends to this idea. In over twenty years, all of our clients who have successfully navigated multiple generations of succession planning have all been intentional with unity. They talk about it, work up agreements, carve out time to stay connected, and sometimes argue. But they never assume unity. They are intentional and that makes them sustainable.