Only 12 percent of family businesses make it to the third generation, according to a study by the Family Business Institute, but even the ones that survive that long aren’t home free. The rate of survival drops more than half with each generation.
Take Weller Book Works, of Salt Lake City’s Trolley Square, for example, owned by third-generation bookseller Tony Weller. His grandfather Gus Weller opened Zion Bookstore in 1929, and his son expanded and renamed it Sam Weller’s in his day, but Weller Book Works has suffered tough times since the boom of suburbia, big box stores and online retailers.
And it's not alone. “The deaths of businesses now outnumber the births of businesses,” said Gallup’s CEO Jim Clifton earlier this year. 2008 started a trend, reported Gallup, with startups dropping below 10 percent of all American businesses and nearly 10 percent of companies closing each year.
“We’ve struggled a lot the last 20 years,” Weller admits, but he doesn’t regret taking over the family business. “Maybe I’m too stupid to get out,” Weller allows. “[But] by the time I was about 19, I thought of myself as a book man … it would be like cutting part of my soul off to do anything else.”
Although Weller successfully saved the family bookstore by moving it from Main street to Trolley Square a few years ago, he wasn’t specifically raised for such a task. “Kind of like sex, money was a topic that we didn’t talk about too much in the family,” Weller explains.
But investment analyst Andy Webb thinks that more financial focus could help small business owners navigate the difficult economic waters. “I see financially enabling families a lot,” he wrote in an article for CNBC, “but at the same time, I also witness great examples of families taking strides to educate future generations and instill in them a work ethic, drive and financial savviness.
But for Weller, parenting has nothing to do with business. “I’m just trying to raise an enlightened human being,” he says. “I figure if [she’s] intelligent and can think for herself … she’ll make good decisions.” Weller might be facing the end of the line for a family-owned bookstore. His only child isn’t sure yet if she wants to take over the business, and he and his wife aren’t prodding her down any specific path.
Andrew Royce Bauer, second generation CEO of Royce Leather, tends to agree with Webb. While he thinks that no child should be raised for the family business, he does put great value in financial preparation. “Children should be groomed to add value to themselves,” he told the Deseret News in an email. “I was groomed to be an entrepreneur, and it was only when I realized that I could best apply my work ethic and decision-making to the family business that I finally took lead of the company.”
But Weller and Bauer both agree that some family members aren’t cut out for the job. “Relatives who work in family businesses are seldom average,” Weller says. “They’re usually very good or very bad,” seeing it either as an honor or “a job of convenience that is owed to them.”
Weller has enjoyed impressive harmony with his parents after taking over the bookstore, but he’s also seen sibling rivalry tear family businesses apart. Which might be why only 72 percent of family business owners think they’ll pass their company on to their relatives, according to a study by The Alternative Board.
He hopes Weller Book Works will beat the statistics — the Family Business Institute reports that only 3 percent of family businesses make it to the fourth generation — but he isn’t going to force it on his only child. “I’m more than a little romantically attached to this idea of a multigenerational bookstore,” Tony says, “[but] we’re not pushing her in that direction because the living is not as good as it used to be.”