When sisters Moo Thorpe and Sonja Bohannon’s father suddenly died in 1992, it was more than a family tragedy. It jeopardized the future of their three-generation family ranch and hotel business in New Mexico.

“Our dad was like John Wayne,” said Thorpe. “Everything revolved around him.”

Her father might have felt like John Wayne, but he was not immortal. His sudden death and the lack of a written succession plan threw the family into a tailspin.

“Mom took over, but she was resentful,” said Bohannon. “Everyone expected her to be dad. A few years went by, and we noticed she started pulling away. She didn’t call as often, and she didn’t talk to us about what was happening on the ranch like she used to.”

Then, the sisters learned that she’d been talking about selling the ranch to a local hotel chain.

“We were facing a crisis,” said Thorpe. “We would either lose the family, lose the lodge, lose everything, or make the best of it and maintain a relationship.”

The family retained a family-business consultant who arranged a retreat for the entire family four children from his two marriages and their father’s widow, Lore Thorpe. At the retreat, they created a matrix or chart to rank the concerns and needs of all involved, considering both financial and emotional needs.

The results of the exercise were a surprise to the sisters. Even though all the children felt a strong emotional attachment to the ranch where they’d grown up, the formal evaluation process revealed that the best choice for everyone involved was to sell it and move on.

“When we sold it, I felt as if I’d been set free,” said Moo Thorpe. “I didn’t want to be crippled by it anymore, and I didn’t want my daughters to be crippled by it.”

“It was cathartic,” said Bohannon. “It’s still raw. It was a lesson in letting go.”

Common challenges

The challenges faced by the sisters were extreme but not unique. Over 90 percent of businesses in North America are family-owned businesses, according to the Family Firm Institute in Boston. Family-owned businesses account for 78 percent of U.S. new-job creation, 60 percent of all employment and over 50 percent of the gross domestic product, according to FFI, a professional organization that promotes an interdisciplinary approach to family-business consulting.

FFI’s annual conference in Washington, D.C., last week, attracted a broad range of professionals who serve family businesses, academics and owners of family firms.

FFI President Francois M. de Visscher, who is a family-business consultant and fourth-generation-family businessman, said building a family business offers a terrific opportunity to build tax-deferred wealth within a family. Parents who are able to pass on a prosperous business to their children also receive a great deal of pride and satisfaction.

He said right now, with the aging baby boom generation, the country is facing the largest intergenerational transfer of wealth in its history more than $4.2 trillion stands to be passed on by family businesses in the next 20 years and over $10 trillion in the next 40 years.

However, despite the statistics that indicate their dominance in the economy and the many advantages of family businesses, only 30 percent of family businesses survive into the second generation, 12 percent into the third and just 3 percent last into a fourth generation, according to the FFI.

Experts at the conference said family businesses face additional challenges that non-family businesses do not. Among these are the problems of succession and inheritance, as well as the mixing of personal and business matters. In many family businesses there are additional conflicts between those family members who work in the family business and those who do not.

Jim Hutcheson, a consultant and former family-business owner, shared the following example. He worked with a business that was owned equally by the parents, their son and their daughter. They came to him for help because their son had a terrible heroin and cocaine habit and had embezzled almost $250,000 from the business.

“They came to me because they wondered what to do,” Hutcheson said.

Business vs. family

Clearly, if this embezzling drug addict had been a business partner and not a brother and son, there would have been no question about the course of action. But family members in business with each other have trouble making decisions that put the business ahead of family concerns, even when the solution might seem obvious to an outsider.

It’s for this reason that outside counsel can be so crucial for the survival of family firms, especially at times of transition, be they from business growth, succession or any other major changes.

“In the 1970s, no one wanted to talk about family business,” said David Pistrui, who teaches at the Alfred University Center on Family Business. “It was seen as shameful. Now, the entrepreneurial spirit is seen as positive, and there’s a close association between entrepreneurship and family business.”

Here are some tips on choosing an outside family-business advisor from Anthony Bogod and Peter Leach, two presenters at the FFI conference:

– Make sure the person is not affiliated with any family business members. Leach said hiring a friend or associate already known to the family is “the kiss of death.”

– Make efforts to keep the relationship professional, beginning with the hiring process.

– Do not allow the mediator to be drawn into family relationships; their involvement must be kept to the business level alone.

– Choose a person that all parties can trust.

– Set clear expectations of what you want the counselor to accomplish at the beginning.

– Make sure everyone involved is open to change.

– Let the consultant act as a confidant to the business. They must understand the family-relationship dynamics but not get involved in them.

– A consultant should serve as a window to the outside world, a mirror to the activities of the business and a catalyst for change.

Reporting by Sarah Prior. Jane Applegate is the author of “201 Great Ideas for Your Small Business,” and is founder of ApplegateWay.com, a multimedia Web site for busy entrepreneurs. She can be reached via e-mail at [email protected].