During the early stages of building a business, most entrepreneurs are not thinking generationally. They are instead engrossed in the details that make start-ups work: perfecting a product or service, acquiring adequate start-up funding, identifying a customer base and determining how to reach it, and making payroll.
Many entrepreneurs have grand hopes of surviving the life cycle of a new venture, including a smooth passage through the “valley of death”—when debt is taken on but product launches are not taking off. Then, they begin crafting an exit strategy. The legends of Silicon Valley are inspiring, after all.
Starting a business with an exit plan in mind is popular. It is an idea synchronized with the values of modern times: think, act, and win quickly, then move on to pursue the next success. It can also get pricey. Surviving the valley of death can require continual injections of funding. This is one of the finance-centric models of entrepreneurism.
Another such model is a family business that is founded to support the economic needs and lifestyle of the founding family. Often times these businesses serve niche markets and if the next generation is not attracted to join the business, harvesting the business is easier than trying to change grown children’s minds by forcing an ownership succession plan.
Finance-centric models of entrepreneurship can be exciting. If they are successful, there is the possibility of generating big gains. The number of people that benefit from these gains, however, is few: those with close ties to the ultimate financial transactions.
In 1949, my father had his high school degree, experience as a pilot flying B-24 planes in World War II, and five children. He and my mother decided to start a business to feed their family. They too were at first focusing on the immediate needs of their new venture. As children of the Great Depression, however, their history motivated them to form a longer-term dream. They hoped their business would grow big enough to feed their family and last long enough to offer their children a job, the highest prize at that time. From the very beginning, my parents were thinking generationally about their business. Seven decades later, this business continues to survive.
The business my parents founded, and which my family has continued to lead, is an example of a multi-generational stewardship model of entrepreneurism.
A multi-generational family business model benefits:
- Family members—with a professional network, job opportunities, financial security, a source of pride, and a unified purpose
- Associates—by offering a stable work environment where they can build a career and grow professionally without the threat of corporate buyouts and ownership changes. Family businesses have the financial freedom to make decisions that benefit associates and create loyalty, like investing in their individual development.
- Customers—by buying from a secure source, dedicated to consistently providing quality products and services and offering reliable care for the customer
- Community—with jobs and economic transactions that support local families and the local economy, and with financial philanthropy that responds to community needs
The number of people who stand to benefit from entrepreneurial models that are set up with generational forethought is many. It requires owners, however, to wear the hat of “steward” and trade-in short-term gains for broader, long-term value.