As editor of Crain's New York Business has a feature today about third- and fourth-generation businesses that have managed to survive for many decades -- and changes of leadership. The story focuses on the retail sector, but there are some lessons here for manufacturing companies, too.
First, the bad news. If you're an entrepreneur with a goal of building a company that will survive and sustain your family for many generations, the odds are against you.
The story quotes John Messervey, president of the Lake Forest, Ill.-based National Family Business Council, who says that only 3 percent of retail family businesses make it through the third or fourth generation. That's better than most other industries' long-term survival rates -- including manufacturers.
"Retailers last longer than manufacturers," he explains, "because it's easier for retailers to reinvent themselves by changing their product mix -- easier than if you have a foundry making buggy whips."
Indeed, dealing with changing times is one key for long-term survival. Reporter Cara S. Trager cites this example:
While the current crop of owners are respectful of earlier generations' wisdom, they never rely solely on long-ago decisions and tactics to keep their businesses going. Some are taking their firms in directions the founders could not have imagined.The Strand Bookstore in Greenwich Village was started 82 years ago by Benjamin Bass. Son Fred Bass, 81, today owns a massively expanded book-selling operation with his daughter, Nancy Bass Wyden, 48.
In 1997, after about four decades of renting space in the Broadway building that currently houses the store, Fred Bass purchased the property for $8.2 million. Father and daughter later installed an elevator and air-conditioning as part of a major redo. They embraced the Web in 1999. This year, with an eye toward maintaining the business's average daily sales of some 6,165 books -- that's right, 6,165 books per day -- they redesigned the store's entrance in order to reduce crowding, and they stopped requiring customers to check bags before entering.
But there's at least one thing that Mr. Bass refuses to change: the almost compulsive book-buying strategy that Benjamin Bass long prescribed.
"My father used to say, 'You can't sell a book you don't have, so you've got to keep buying,'" says Mr. Bass. "But he would turn over in his grave if he knew the volume we do -- and the amount that we have in storage waiting to be processed."
That "turn over in his grave" line really sums it up for me. Some family-owned manufacturing businesses can continue to do the same thing, serving the same customers and using the same processes for generation after generation.
But not many.
Often that results in friction in the family. Remember Bill Bregar's story about Dutchland Plastics Corp., and the disagreement among family members when the company made its decision to move into blow molding?
Anyone involved in a family business can tell you that such disputes aren't rare. Add to the mix the dynamics of family relationships, and you've got plenty of opportunities for conflict. The second- and third-generation company owners who I know often can share stories about disputes they've had with their parents over changes at the company.
But the Crain's New York story shows that some companies do manage to survive. I'll leave you with the quote that Trager used, from Ian Ginsberg, the 47-year-old head of 171-year-old C.O. Bigelow Apothecaries in Greenwich Village, which his grandfather bought in 1939:
"We survived the Civil War, Lincoln's assassination and the Depression in 1929, and we will survive the current economy."
How many of today's family-owned plastics processors and toolmakers will be able to look back 171 years from now and say they've also managed to survive for the long haul?