Five Tips for Sustaining a Successful Multi-Generation Small Business

The pizza joint where grandpa makes the sauce, mom makes the crust and the college-aged daughter works summers. The corner dry cleaner now run by the founder’s niece. The specialty print shop passed down from father to son. Family-owned businesses are community staples. Yet unlike larger businesses that have access to considerable resources, family-owned businesses face mounting challenges when it comes to surviving across generations.

According to the Family Business Institute, only a third of family-owned businesses survive into the second generation and just 12 percent make it to the third. The Bureau of Labor Statistics notes that only 21 percent of small businesses make it to the 20-year mark. When it comes to second generation businesses, more than 60 percent fail. Those statistics beg the question: what is required to sustain a small business and pass it on to future generations?

Thriving as a Second-Generation Small Business Owner

Siblings Licia Accardo and Tony Spatara balance honoring their father’s vision for the Chicago-based restaurant he opened in 1981 with moves to diversify the business and invest in opportunities that keep Café  L’Appetito a vibrant and must-visit establishment. Café L’Appetito celebrates its 40^th anniversary in October.

The second-generation business owners merged their role as caretakers of their father’s legacy with a robust expansion plan. Under the stewardship of Accardo and Spatara, Chicagoans and visitors to the Windy City enjoy Café L’Appetito menu offerings at multiple venues, including Soldier Field, the United Center, Midway Airport, Northwestern Memorial Hospital, and their Gold Coast and West Loop locations. The siblings also operate a booming catering operation.

Accardo and Spatara offer five tips to help second-generation small business owners sustain and grow the family business for generations to come.

1. Embrace the Legacy, Challenge the Status Quo

While tempting, avoid “don’t mess up a good thing” thinking. A model for success is just that—a record of what’s worked, but not necessarily a template for future success. Sparata suggests honoring the core of your business and using what’s worked as the foundation for what’s next.

“We had to make a decision. Do we want to take this to the next level? Do we want to just coast where we're at and just make it easy for ourselves? We decided to just try to build and build and that's how it's been going,” said Spatara. He notes that when his Dad passed away, the siblings asked themselves three questions: What are we going to do? What do we want to be? What’s our plan? Spatara recalls that his father would fondly tell him, “Tony, if you're not evolving and changing with the people, you're not going to make it.”

2. Cherish Your Base, Welcome New Customers

Accardo and Spatara continually seek expansion opportunities and new revenue streams, a diversification strategy they credit with helping them weather COVID-19. Accardo notes their father tried to avoid complacency, a challenge she and her brother have adopted. “He took a leap of faith and it worked. I think it worked because of hard work and passion,” said Accardo. She encourages small business owners make time to network, stretch beyond what comes easiest, and always seek growth opportunities. “My brother and I both understand that there's more out there that we could be doing. You're always looking for something new to do and keeping it fresh and expanding your customer base obviously, reaching as many people as you can,” said Accardo.

3. Invest in Technology

The systems and processes that helped a business five, ten or twenty years ago may no longer offer an advantage in today’s online environment. Accardo encourages small business owners to explore and invest in technology. While she acknowledges the initial cost is sometimes more than a business owner would like to make, the return on investment in terms of time saved, inventory management and peace of mind is well worth it. Converting to an online payroll system, virtual marketplace, online inventory management system and other  technological trends create capacity to allow business owners to focus on managing and growing the business instead of being trapped in the back office under piles of paperwork.

4. Support a Positive Environment

The constant need to recruit, interview, and train new employees disrupts business flow, employee productivity, and ultimately, the bottom line. Employee retention can be particularly cumbersome for small businesses. Accardo and Spatara place a premium on employee retention, fostering an environment where employee turnover is lower than industry peers. Accardo stresses the importance of treating employees fairly, clearly communicating roles and responsibilities, and fostering an environment of mutual respect. “I think any of our employees can come to us with any problem and they know that deep down and we'll work through it with them no matter what happens. I think that if you spoke to them, they would tell you that,” said Accardo. “They know that we are a family. I think a lot of our employees are also family oriented. We actually have some couples that work for us. We've had brothers and sisters work for us. We just have that family feel.”

Accardo proudly notes that some employees have worked for them for decades. She and Spatara believe that you should be respectful to the needs of your employees and honor the dedication they demonstrate. Ultimately, by creating a welcoming environment and maintaining a consistent workforce you help set your business up for long-term health.

5. Plan for the Next Generation

At some point, the founder of a business will no longer work for one reason or another, and the next generation needs to be ready to step in so that there is a seamless transition. It is never too soon to develop a succession plan—even if implementing the plan is well into the future. A succession plan should consider each aspect of the business, including who will be in charge of what, the associated legal and tax considerations, defining roles and responsibilities for key employees, and more.

There are many benefits when it comes to creating a succession plan. For starters, it prepares everyone in the business for the transition. This means that everyone in the organization understands what their role will be following the leadership transition and how it will impact them. With a succession plan, each and every role in the organization is accounted for, and it allows employees to understand what they can expect. Beyond this, a succession plan is helpful when it comes to saving money. By taking the time to plan how to fill the roles in an organization following a transition, an organization will save as it relates to the costs of recruiting, as well as the financial benefits of having a seamless transition versus a business that is scrambling to try and run efficiently. It takes time to create one, but a comprehensive succession plan ultimately  saves time, money, and unnecessary headaches in the future.