Standing the Test of Time: Part 2
Keys to longevity
In our first of three articles about sustaining a multigenerational business, we examined the benefits and potential threats of running a family businesses. In this second article, we will unpack the keys to building long-term success in your organization.
Many startups, whether dependent on family ties or not, experience early success only to falter. And while it’s commonly believed as many as 90 percent of new business ventures fail in their first year, statistics do not bear this out; in fact, almost the opposite is true—some 80 percent of new businesses make it past that critical milestone.
The farther out one looks, however, the lower the numbers get: only half of businesses last past the first five years, and only about a third manage to survive for a full decade. This is often by design, and creating a legacy company isn’t for everyone; but for those who intend to build a business to survive for generations, it’s important to frankly assess what it will take to succeed.
In our research and discussions with industry members about legacy companies, again and again, the overriding factor that helped propel these businesses to the height of success was innovation.
Innovation, Culture & Values
Continuing businesses are often the first to recognize the need for innovation and change, and the value of recognizing new ideas.
“You need to make sure that your historical success doesn’t foster a sense of complacency,” observes Fred Duckwall, president of a shipping business in Hood River, OR. In his years with this Oregon-based family business, which is nearing its centennial, one thing has become crystal clear: “You have to stay on the cutting edge to stay successful.”
Culture is a nearly universally agreed-upon aspect of building a strong legacy company as well. Having a shared set of values and communicating them clearly to everyone on the payroll, family or not, was cited by all of our respondents as a nonnegotiable aspect of long-term success.
Another source, who previously led a 70-year old business in Indianapolis, emphasized this point, noting that their company culture was recognized within and outside the organization. In fact, the culture of the organization, including how to conduct business, was part of the training process for new employees.
Yet espousing corporate values is not enough; leaders must also be accessible and communicate regularly about any major transitions and the company’s well being—and this includes verifying the balance sheet and company worth. “It’s important to calculate the fair market value of the business,” recommends Tim Vaux, a strategic planner for consulting firm FreshXperts. “This should be assessed on a regular basis, preferably by an outside professional.”
While no one knows the ins and outs of a legacy business like the people who have been there for years, their familiarity with the daily operations can lead to blind spots and a failure to recognize new opportunities. Outside candidates or consultants can look at these issues with fresh eyes to explore the pros and cons without bias.
Whether a legacy company is still owned and operated by family members or not, its longevity certainly offers tangible competitive advantages. These businesses offer continuity in operations, products, reliability, and strong relationships in every link of the supply chain—and these strengths cannot be matched by newer firms.
Duckwall calls these strengths the “bedrock” of his company. “You’ve paid the price over a hundred years and established your reputation for integrity, fairness, and product quality,” he says. “It works, and it stands the test of time to prove it.”
Having established these keys to longevity, our third and final article in this series will look at making effective leadership transitions at a family business.