Entrepreneurship or family business…or both?

By: Daniel Van Der Vliet
David Tingue, MBA ’92

David Tingue, MBA ’92, CEO of Tingue, Brown & Co, speaks at the “Looking Back, Moving Forward” panel during the Smith Family Business Institute’s 2017 Families in Business Conference.

During my first year at Cornell University, in 2014, one of my initial actions was to build relationships within the entrepreneurship community. It was robust, active, and I felt the ideal place for the Smith Family Business Initiative to build some key relationships during our first year. I posted a note about an upcoming family business event with updates on events and opportunities on the Cornell entrepreneurship listserv, which reaches well over 3,000 people. The reply that came back to me within minutes was “Hey Daniel — not sure that this is entrepreneurship really, right?” I paused for a moment, and then replied:

I would argue that family business and entrepreneurship are inexorably linked. Especially in the case of Chinese family businesses, where 80 percent of the next generation have no plans to return to the enterprise and instead look to utilize their vast family resources for their own entrepreneurial pursuits.

In the US, entrepreneurship and family business are also closely linked if not joined at the hip. Seventy-seven percent of all new business ventures established in the US are founded with significant involvement of the family in the business, and another 30 percent engage family members within the next two years. For any enterprise to survive beyond the current generation, entrepreneurship is a key factor in creating new opportunities within the family (for additional family members) and for sustained business growth to remain viable and competitive.

The person who emailed me never replied, and since then, the family business and entrepreneurship programs at Cornell have partnered on many successful events and serve many of the same students.

In the US, more than 300 schools offer entrepreneurship studies, and schools and universities offer perhaps as many as 4,000 courses in entrepreneurship. By contrast, higher education offers fewer than 75 programs in family business, although that number is growing. It’s alarming that the message that leaves one with is that starting a business is sexy, but sustaining a business is not so sexy.

David Tingue, MBA ’92, is the fourth-generation CEO of Tingue, Brown & Co, a family business in the commercial laundry industry founded in 1902. For any teenagers or college students contemplating their future career, it would be easy to argue that commercial laundry may not be a glamorous option. David explored Wall Street before pursuing his MBA at Cornell University. The appeal of the family business changed as his career and educational perspective matured.

“I never considered myself an entrepreneur in the pure sense of creating a new business, but the family business provided me an existing system to be an entrepreneur within and create something needed and new that has allowed our family business to survive for over 100 years now,” said David. “At the same time, I get to enjoy developing and encouraging the entrepreneurial spirit of non-family management.”

I have been collecting some rudimentary research throughout 20 years of teaching classes and public speaking. I begin with the question, “What is the first word you think of when you hear the term family business?” It is not surprising to know the top three words are “small,” “fighting,” and “entitlement.” While these words may describe some businesses, those of us who work with family businesses know they certainly do not encapsulate the vast majority, which are innovative, nimble, and enterprising. “Entrepreneurial,” by the way, does not even crack the top 10 list of words in my research.

Why do so many people immediately associate family business with such negative words?

Some might blame the media for this negative connotation. Portrayals of family business in popular television series, such as “Succession” or “Arrested Development” depict dysfunctional family businesses at their worst competing for parental favor, privilege, or wealth. When family businesses make the headlines, the stories often involve litigation, larceny, or lethal outcomes. See Gucci, Gallo, or Guinness.

Studying family business—a broad term that generally includes business, family enterprise, family wealth, and even entrepreneurship—aims to understand many of the human elements associated when family and business overlap, regardless of whether that business is a one-person startup or a multinational juggernaut. Entrepreneurs can learn from family-owned businesses in the same way that families should always be reminded to remain entrepreneurial. While not all entrepreneurs involve family, and many family businesses fail to be entrepreneurial, they are also not mutually exclusive of one another.

Family businesses are built by entrepreneurs who have succeeded. These entrepreneurs made it through the early stages of business formation in large part because they pulled on the trusted levers within a family to help with access to capital, networks, distribution channels, or physical resources needed for most startups. When I speak with budding entrepreneurs, I often counsel them to begin with the end in mind. While it might feel unnatural to create formalities like job descriptions and buy-sell agreements when working with your parents or siblings, these will serve those individuals well as the business grows, interest wanes, or co-founders simply seek a convenient exit.

“Family business” has different meanings to different people. The responses to my “One word” quiz also include “legacy,” “nepotism,” “proud,” “complicated,” “local,” “flexible,” “informal,” “private,” “entitlement,” “global,” and even “mafia.” More than half of the responses have a negative connotation.

“Family business” also implies a singular business unit, like a store, office, or factory. This is why family business can conjure up phrases like “mom and pop shop.” As the vernacular has evolved, terms such as “family entrepreneurship” or “family enterprise” are more indicative of a a portfolio of businesses or activities that a family may be involved in. As a family might acquire new business lines or invest in additional opportunities, it also creates space for the next generation to engage in new initiatives that can open the door to their future involvement. This is a more holistic approach to understanding the many ways in which a family and business drive entrepreneurial activity and behavior.

It was once believed that one good idea could serve a business for three generations. Today, it is more likely that each generation needs to realize (at least) three innovations. Family businesses are a driving force in the world economy and this will continue to be the case. Moving beyond the notion of “family business” towards “family entrepreneurship” emphasizes the many aspects that make these families and businesses so dynamic.

Cornell University has long embraced entrepreneurship and often finds itself atop many entrepreneurship rankings. Even Entrepreneurship at Cornell, a diverse, university-wide program that finds and fosters the entrepreneurial spirit in participants from every college, every field, and in every stage of life, effectively began as a family business program. In its early incarnation, it was known as the Personal Enterprise Program (PEP). Sam Seltzer ’48 (Eng), one of the drivers behind the PEP, understood the relationship between family business and entrepreneurship before studying either was vogue, in the early 1980s. PEP quickly grew from one course to over 35 courses, and eventually morphed into what is now Entrepreneurship at Cornell. Although Cornell hosted several family business-themed conferences in the early 1990s under the PEP banner, entrepreneurship became more fashionable on college campuses and the focus shifted, as well, towards technology, venture financing, and build, grow, sell mindsets.

Family and Entrepreneur Traits
The role of the family in developing entrepreneurs was something the Personal Enterprise Program at Cornell was founded upon, with early support from Sam Seltzer ’48.

Is it possible to change the negative associations with family businesses and capture some of the ground that entrepreneurship has claimed—or at the very least, share that fertile ground? This has been a focus for many family business programs at universities and colleges in North America. The students I have seen at Cornell University embrace this mindset as well, knowing that their families have put them in a position to succeed, whether it is in their family business, or venturing out and utilizing all the skills and resources they can access through their family.

Focusing on the many positive attributes of family business is an important first step. In the context of the global pandemic, family businesses have had an opportunity to demonstrate that for many, they’ve been through all of this before, not to mention economic depressions, recessions, wars, and a few political upheavals as well. A survey by Banyan Global, Family Business Pulse and Response to the Pandemic, highlights some of the best practices of family businesses that endure: high levels of family involvement and communication, timely and much-needed support of community and employees, and an enduring optimism and resilience. These are attributes that any organization, public, private, or nonprofit, should subscribe to.

While family businesses will never be immune to scandal or crisis, let us continue to hold up those that survive and why they do. If we look a little closer, we are likely to find that the private nature of family business often obscures an incredible resolve, endless innovation, and a quiet determination—all the same qualities that drive any entrepreneur towards success.

After all, family businesses are launched by entrepreneurs who succeeded.

Daniel Van Der Vliet

Daniel Van Der Vliet

John and Dyan Smith Executive Director of Family Business

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