MassMutual studies successful family businesses
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SPRINGFIELD, Mass., Dec. 10 /PRNewswire/ -- "You can choose your friends, but not your family," so the saying goes. But many in the growing ranks of the unemployed who have become victims of the floundering economy are choosing their family members as their business partners. Entrepreneurship was up in 2008, with about 530,000 new businesses created each month, according to the Index of Entrepreneurial Activity by the Kauffman Foundation.(1) And it's on the rise again in 2009, according to LegalZoom, an online legal document service.(2) To view the multimedia assets associated with this release, please click: http://multivu.prnewswire.com/mnr/massmutual/41609/It's easy to see why. The advantages of starting and running a family business paint a Norman Rockwell-like picture. According to Massachusetts Mutual Life Insurance Company's (MassMutual) research study, FamilyPreneurship: What Every Entrepreneur Should Know before Starting a Business with a Family Member, conducted by Harris Interactive between January and March 2009, they include:Being your own boss (75 percent)Working for yourself and family (69 percent)Sharing a desire to succeed with others (65 percent)Flexibility of schedule (61 percent) But the study, conducted via focus groups and an online survey of over 500 business owners, identified downsides too, and they are significant, including more stress (44 percent), less time off (39 percent) and family disagreements (32 percent). The inability to separate the family from the business can often sabotage the enterprise. Only a bit more than 30 percent of all family-owned businesses survives into the second generation.(3) Twelve percent still will be viable into the third generation, with only 3 percent of all family businesses operating at the fourth-generation level and beyond.(3) How can would-be entrepreneurs make sure their family business is part of the 3 percent that survive?"Family businesses offer a great upside, but entrepreneurs need to go into these new ventures with their eyes wide open to give themselves the best chance to succeed," said Beth Wood, an assistance vice president of the Life Company Marketing division of MassMutual, and a former family business owner herself. To help ensure your start-up doesn't stall, MassMutual offers the four secrets of successful family businesses:Effective communicationA high level of trust in partners and advisorsGood planningWork-life balance Speak up! Effective communication tops listCommunication was by far the top critical component, impacting all other aspects of business owners' personal and professional lives. When asked how good relationships are maintained, 28 percent selected communication as an important component to their success. One husband and wife retail team who participated in the research study noted that their own business has suffered from lack of communication between the business' three owners. "There's no communication. There's no cohesiveness. There are three different owners, three different bosses, three different views – hence nothing at times seems to get done."Who to trust?When asked who the person was they most trusted, participants in the MassMutual study listed their spouse 38 percent of the time, but when asked whom they trusted for business advice, in general, accountants (55 percent) came up more frequently than spouses, who were tied with lawyers for second place at 43 percent. "Overall, spousal companies and majority owners are significantly more likely to say their spouse is their most trusted advisor," summed up Wood. "However, family members are significantly more likely to say their accountant, parent, child or friends are their most trusted advisors."One husband and wife owners of a retail lawn equipment company who participated in the study commented that they rely on and trust each other, because "when there is something to be done, it usually gets done 100% right."Our plan is to make a planIt's no secret that long-term planning is one of the most difficult tasks to accomplish for small business owners. Sisters and restaurant owners who responded to the MassMutual survey summed it up best: "It's because we're so busy running our business from day to day, and running kids everywhere when we're home, we just don't have the time to think about this kind of stuff, and that's the reality."MassMutual's 2009 FamilyPreneurship survey found that only:57 percent have developed a plan to deal with estate taxes generated from the business in the event of the owners' death39 percent of the business owners surveyed have a documented succession plan27 percent have a buy-sell agreement in place20 percent have disability income insurance for key employees in placeWork-life balance, the lopsided equationOne family business owner who participated in the survey recalled that work commitments prevented him from accompanying his wife home from the hospital after she gave birth to their second daughter, a slight she still reminds him of 22 years later. On the other hand, another husband and wife team said they always can depend on the other to cover the business if one has to attend to a personal matter."Ironically, work-life balance was both one of the most commonly-named advantages and disadvantages. The lines between home and work can become very blurry, and it's important to establish boundaries, communicate needs with your partners, and plan," said Wood. Another challenge: 26 percent of respondents noted that you "can't fire a family member." That's important because familial relationships, as opposed to spousal relationships, can be a hotbed of discontent. Family members (not spouses) who are business partners were more likely to cite lack of agreement, goal setting, lack of personal privacy, coordination and difficulty making decisions as disadvantages."My father and uncle had a bad relationship. They argued all the time. It hurt the business a lot," said one daughter who responded, now in business with her father. So what is the solution if the downsides of working with a family member start to outweigh the advantages? Having a trusted advisor facilitate conversations and address potential problems with proper planning can provide clarity and reduce tensions. "Professionals who are skilled in the special dynamics of family businesses can help owners anticipate some of the thorniest issues and put plans and funding vehicles in place so that the partnership and the business are successful," said Thomas Waring, Jr., a financial services professional currently studying to become a Certified Family Business Specialist with the Buffalo Agency, a MassMutual general agency in the Buffalo, N.Y. area.Learn how MassMutual helps entrepreneurs meet their business needs , visit massmutual.com/smallbusiness.MethodologyThis is a two-part study of focus groups among small business partners, and an online survey. Six focus groups were conducted by Harris Interactive on January 29, 2009 among 6 separate pairs of family business owners. Participants met the following criteria: all own a business with a spouse, sibling, or immediate family member, have between 1 and 500 employees, have been in business for at least five years, and earn a total annual revenue of $1 million or more. The survey was conducted online within the United States by Harris Interactive on behalf of Transamerica Center for Retirement Studies between March 6 -20, 2009 among 518 business owners, among which 330 are involved in a spousal business relationship and 250 are involved in a business relationship with a family member other than a spouse. Respondents met the following criteria: all U.S. residents, age 18 or older, have between 1 and 500 employees, have owned their business for at least five years, and have annual revenue of $500,000 or more. Results were not weighted. No estimates of theoretical sampling error can be calculated; a full methodology is available. About MassMutualFounded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company's strong and growing network of financial professionals helps clients make good financial decisions for the long-term.MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, Inc., member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.About Harris Interactive®Harris Interactive is a global leader in custom market research. With a long and rich history in multimodal research that is powered by our science and technology, we assist clients in achieving business results. Harris Interactive serves clients globally through our North American, European and Asian offices and a network of independent market research firms. For more information, please visit www.harrisinteractive.com. CRN201110-126021(1) Kauffman Index of Entrepreneurial Activity, 1996-2008 (April, 2009) http://www.kauffman.org/uploadedFiles/kiea_042709.pdf(2) On to Plan B: Starting a Business, New York Times, August 23, 2009 http://www.nytimes.com/2009/08/23/business/smallbusiness/23venture.html(3) Joseph Astrachan, Ph.D., editor, Family Business Review, "Facts and Perspectives on Family Business Around the World" (United States data), 1/2005. Also available at http://www.ffi.org/default.asp?id=322.Thomas Waring, Jr. is a registered representative of and offers securities and investment advisory services through MML Investors Services, Inc. Member SIPC. Supervisory Office 300 Corporate Parkway, Suite 216N, Amherst, NY 14226 – (716) 852-1321. CA License #0B18154.Contact:Karen Lavariere-Sanchez413.744.7660klavarieresanchez@massmutual.comSOURCE MassMutual Financial Group
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