“Ownership and equity for each family member should be equal unless there are extenuating circumstances,” Vaux continues, “and if someone wants to opt out of the business, a buy/sell agreement is important to understand how shares will be transferred.”
Vaux also emphasizes the need to develop contingency plans in the event senior members decide to leave the business. A death in the family is always devastating, but it’s even more so if it precipitates the demise of a company that both family members and others depend on.
To make sure a company is prepared for such events and its fate rests in the hands of those best qualified to run it, Vaux recommends the creation and maintenance of a pool of potential replacement candidates, revisited annually by executive leaders.
Keys to Longevity
So what are the keys to long-term success? 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 heights 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 Duckwall.
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. Espousing and exhibiting a shared set of values—for everyone on the payroll, family or not, as well as customers and those outside the organization—is considered a nonnegotiable aspect of long-term success.
