How to Run a Successful and Sustainable Family Business

Learning to cultivate relationships within a family business is what breeds success

There’s an old axiom about family wealth: Those who don’t have it, make it, and those who have it, lose it. Global data suggests 70 per cent of wealthy families worldwide lose their money by the end of the second generation; 90 per cent by the end of the third generation.
According to the Canadian Association of Family Enterprise, around 80 per cent of all businesses are family-owned and operated. That’s a lot of wealth evaporating through the generations.

So what’s happening? Usually, a breakdown in family relationships somewhere along the line, says Karen Laprade of Vancouver-based Lead Family Enterprise Advisors. This can be caused by shifting priorities—perhaps a daughter wants to be an interior designer, not a beverage-industry magnate—or any number of other issues, from inheritance and succession, to overall vision.

“Relationships need to be cultivated just as much as the financial and business end of things. It’s a big area that’s missing in traditional family business advising,” says Laprade. Managed well, relationships can be a source of strength for family enterprises, enabling effective leadership and nimble decision-making.

“We get a lot of calls from families who share an asset, and relationships are being lost,” says Laprade. Consider, for example, the family cabin: for all intents and purposes a family business, with shared costs and responsibilities—and potential relationship quagmires. Lead will host a seminar on managing family cabins on June 3; info@lead.ca.

To remedy the shortcomings of traditional family-business consultancies, Lead provides integrated advice from a roster of experts, in financial planning, legal issues, insurance, risk, wealth management, philanthropy and even family therapy. For new clients, the company creates an “issue triage” to determine the most critical needs. Next comes a sit-down with all family members, and a detailed assessment of values, to get to the bottom of what motivates each individual. It’s often revelatory, says Laprade, for families to uncover where their values conflict and converge.

“It’s very difficult for family members to get on board with a plan when they don’t share the same ideas or expectations, let alone dreams for the future,” says Laprade.

Once values are clear, a vision and strategy can unfold: to leverage strengthened relationships so the enterprise can grow wealth and prosper, for generations to come.