The notion of starting and running your own business is a dream that many entrepreneurs share. But what happens when you realize your dream? Then what? The Family Business Center, (FBC) an arm of Executive Education in the School of Business at UW-Madison, is there to help.

The FBC's mission is to help family-business owners, their families and their employees maintain a profitable business and successfully pass ownership control to the next generation. It seems simple enough, but statistics reveal that nearly 70 percent of all family firms fail before reaching the second generation and 90 percent fail before the third generation.

Several clients of the FBC took time from their busy schedules to talk with us about how the center helps them deal with some very real issues they face in keeping their business dreams alive and well.

How do you ask for a raise when your son is your boss? It's not a simple situation or even one that most managers encounter, except if you are in a family business. Then, that predicament and many other emotionally laden and complex issues are just part of any ordinary workday.

"When I started this business eight years ago, I knew that there was one person who could really take this company far—my 76-year-old dad, Miles Schwartz. I brought him to Madison from Chicago five years ago and so far, it has been a good decision. Sure, there are problems, but at the end of the day, our relationship remains incredibly strong," says Eric Schwartz, owner of Sara Investment Real Estate LLC in Middleton and a Family Business Center member for four years.

Schwartz credits Family Business Center for helping to smooth over the rough spots of having his dad as his employee. Recently, he was able to share his expertise with an out-of-state family business and help mediate a potentially divisive problem.

The Family Business Center was founded in 1996 to help solve exactly these kinds of unique situations that surround a family business. Housed at the Fluno Center, the goal of the FBC is to help the greatest number of family-owned enterprises succeed and continue into the next generation.

And that's important. Today, more than 80 percent of the businesses in the U.S. are family owned, including nearly one-third of the Fortune 500 companies. Family businesses account for 78 percent of all new job creation, 60 percent of the nation's employment and 50 percent of the GDP, says Ann Kinkade, director of UW-Madison's Family Business Center since 1999. The FBC was established in 1997 by Joan Gilman.

According to the FBC's recently released 2003-2004 annual report, family-owned businesses are an economic force not to be overlooked.

Here in south-central Wisconsin, FBC members employ an aggregate of 8,000 people and generate almost $2 billion in annual sales.

There are almost as many diverse family-business situations as there are members at FBC: "We have daughters and fathers working together, sons working with their mothers, brothers that are just starting out, even one fifth-generation business (Reynolds Transfer and Storage), started by the current generation's great great-grandmother," reports Kinkade.

FBC provides access to experts in area of succession planning, family dynamics, financial management, business planning, banking, law, insurance and human resources — all for an annual membership fee of $2,000.

And for that fee, FBC members get access to university resources and the Fluno Center, the quarterly newsletter, Family Ties, a 20 percent discount on UW-Madison Executive Education programs, peer discussion groups and a monthly seminar program with nationally known speakers who offer information and insights on topics like leadership succession, family relations, compensation and other family-business issues. This month, FBC hosts John C. Thompson, vice president of Thompson Investment Management who will speak on the topic of "Emotional Control of Investments: The Role of Greed and Fear in Financial Decision Making" on Oct. 5.

Passing the torch
"My second son Sam, 25, just returned this summer to begin the fourth generation of the family business. Endres Manufacturing, a structural steel construction company, has been a family business for 78 years. Sam is the first generation to have a college degree in business management and finance, and has the technology talent to move us into the next generation," says Diane Endres Ballweg. Endres Manufacturing has been a member of the FBC since 2000.

"The Family Business Center has been an asset in addressing so many concerns that every small/family business faces. There is a good blend of topics and activities, and the experience and networking with colleagues is valuable and rewarding, but also fun," says Endres Ballweg.

Many family businesses were founded in the economic boom years following World War II and the Korean War. Consequently, the first generation of these entrepreneurs is now preparing to pass the torch. Cornell University economist Robert Avery estimates that approximately $10.4 trillion of net worth will be transferred by 2040, with $4.8 trillion during the next 20 years.

More than one-half of the current FBC members are first-generation owners working with the second generation. For them, one of the most pressing issues is succession.

Here's why.

Research in the field of family business commonly suggested that the founders are responsible for selecting a candidate from the next generation who is the most qualified, most interested and demonstrates the most talent. Now, however, there has been a fundamental shift in theory and in practice. The most current research says that the onus is on the successor, not the founder. "The successor should step up to the plate, and express an interest, develop the appropriate skill set and make it known that they are interested in taking over," explains Kinkade. The FBC now offers annual successor's luncheons to facilitate common successor issues.

"I'd been in my family business PKK Lighting since I was five years old and they would let me carry boxes of light bulbs. I've always worked there, from summers on the aerial truck to now as vice-president. I heard about FBC through another group that I was attending," says Chris Driscoll, vice president of PKK Lighting, of Middleton, a firm that specializes in commercial and industrial lighting, specialized lighting and energy-saving retrofits of current buildings. Jim Driscoll, Chris' dad, founded the company in 1970.

While the Driscolls initially came to FBC as guests, it didn't take long for them to join. "I was struck immediately by the quality of the program and the information presented was relevant. They were talking about things that we have talked about," says Chris Driscoll.

And, as he is primed to take over from dad, there is a difficult transition period expected, but with many of the programs aimed at succession planning, FBC is poised to help.

"The tax ramifications are so great in a family-owned business because everything is so closely held. If you don't plan properly, Uncle Sam is going to end up taking half of your business," says Chris.

Even first-generation business owners see the need for FBC, even though they may be decades away from succession planning.

Ken Pientka, COO of PLANNING Design Build, Inc., in Madison, works alongside his two brothers, Tom and Jim. While they have owned the business for more than a decade, there is no real impetus to look at succession right now. But, because of the quality of programming at FBC, they have "renewed their membership each year with limited or no hesitation," says Pientka.

Jeff Wick, president of Wick Building Systems, located in Mazomanie, one of the larger member companies of FBC explains: "To me, the central premise of the Family Business Center is that family businesses across a wide range of size and types of business have a great deal in common. From the presenters, and from each other, we can learn important lessons without the pain and expense of doing so by trial and error."

The difference of one
In the beginning, FBC was relatively unknown when Ann Kinkade took over as director in July 1999. She brought to the fledgling operation the expertise in vendor relations garnered at her former job at Lands' End and the academic training of an M.B.A. earned at UW-Madison. She remembers that she did a lot more than just work the phones to bring in the members.

"I got out there and cold called," she confesses. And while membership today is strong with 50 member clients, Kinkade still spends time each summer reconnecting with members, touring their sites, listening to their feedback, soliciting their opinions on past and future programming, and always recruiting. Now, it seems that the center is going through a period of organic growth. Word-of-mouth is working strongly in the center's favor, with much of the current growth stemming from member referrals.

A new topic
The field of family businesses as a bona fide business topic itself is relatively new. UW-Madison just started offering a course two years ago, "Issues in Family Business Ownership," with Kinkade as the lecturer. However, she regularly invites guest lecturers with specific areas of technical skill like accountants and attorneys to present topics to the students in attendance. The course is given in the evenings, with the intention of making it available to non-traditional students and others: graduate students, undergraduates or continuing/executive education students who may already be involved in a family business.

The course is given with the intention that students — who may go into their own family business after completion of their studies or start a business that may become a family legacy — will be more prepared than their predecessors were for the unique circumstances that family businesses encounter.

Kinkade has been able to get some very preliminary research about family business due to interactions with the students in the course. And that's important because Kinkade believes that the strong academic tradition associated with the UW School of Business will help to bolster her contribution to better understand the dynamics and intricacies of the field of family business. In fact, Kinkade aspires for the academic research portion of her work to complement the outreach component.

Challenges ahead
Membership is up and growth has been outpaced each year. "At first, the FBC was struggling as an organization," explains Kinkade. With a lack of state or federal funding for the programming, the challenge to grow the center was imminent. But, under Kinkade's tenure as director, the organization is evolving to be a significant player in professional development.

Yet, one of the biggest challenges currently facing FBC is how to attract minority family business. "We know they are out there," says Kinkade, "but we just haven't figured out how to get them to attend programming." Kinkade is likely to use the same model they used to attract female business owners that has been so successful in the past: recruit and then target specific programming to their interests.

In addition to the annual membership fees, FBC is supported by company sponsorships. Currently, FBC has five sponsors:

• DeWitt, Ross & Stevens, S.C., who support FBC members with a group of attorneys trained specifically in the areas of concern to family business: estate planning and transfer of ownership;
  
  
• Associated Bank N.A., a community bank with expertise in areas of asset and trust management;
  
  
• CPA and consulting firm Smith and Gesteland, LLP;
  
  
• The Zimdars Company, Inc., a life insurance agency specializing in family estate planning and succession planning; and
  
  
• Thompson Investment Management LLC.

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What's the difference between a small business and a family business? Often, not very much, says Neil Lerner, director of the UW-Madison Small Business Development Center. In fact, their customer bases often overlap; the differences lie in their programming.

At SBDC, which is also located in the School of Business at UW-Madison, programming centers on building management capacity in the company; moreover, it is geared to be affordable to the small-business owner. It is a federally funded program, while FBC relies on membership dues and sponsorship for funding.

"Another potential difference is that FBC members intend to pass the business to the next generation. This can change their whole focus family-wise and business-wise," remarks Kinkade.

Girl power at FBC

One of the newer member benefits at FBC is "Family Business Women," which meets four times a year. FBW is a direct response to the trend of more female-owned businesses, providing seminars and presentations geared specifically for women in the business world. According to a 2003 survey conducted by the Raymond Institute on family business, it was reported that fewer than 10 percent have a female CEO, but 34 percent responded that the next CEO may be a woman.

Family Business Women is an affinity group predominantly comprised of FBC members. It is an opportunity for women who work in the family business or who provide support from the home front to collaborate and share personal and professional experiences in a small-group setting.