There’s the marketing firm where the parents and children were so at odds with one another that a mediator had to lock them in a room for two days before a settlement could be reached.
There’s the mother who threatened to sell her prosperous medical supply firm, unless her sons ceased their bitter struggle over who eventually would assume control.
And there’s the son of the auto-parts supplier, who had to plead with his father for a raise despite the fact that he had worked at the company for years and was being groomed for succession.
It’s all standard fare in the world of family-run businesses, where clashes between or among parents, siblings and children can have a serious financial impact. Factor in an array of personal issues that go far beyond the bottom line succession, business strategy, how to convince Mom and Dad to step aside and let the next generation take over and you’ve got a recipe for trouble.
“It gets very emotional, and people lose their business perspective,” said John Rooney, chief executive of the Valley Economic Development Center Inc., a Van Nuys small-business consulting firm who has mediated more than his share of disputes. “Family politics are really what it’s all about in a family-owned business.”
And yet, the majority of American businesses are family affairs. A 1994 study by the Family Business Consulting Group in Marietta, Ga. estimated that there are 13.5 million family businesses in the United States more than 75 percent of the total generating between 40 percent and 60 percent of the nation’s gross national product.
The impact of such businesses is especially significant in Los Angeles, with its large ethnic population, disproportionate number of newcomers and conspicuous absence of Fortune 500 firms. The companies are as diverse as the economy itself ranging from restaurants and groceries launched by immigrant entrepreneurs to large, publicly held corporations that have been in the family for generations.
“It is a little understood but very significant part of what makes L.A. tick,” says local investment banker Lloyd Greif.
Greif should know. In the course of his deal-making career in Los Angeles, Greif estimates that half of his transactions have involved family firms generally deals in which the founder, unable to pass it on to the kids, opts to sell the firm to outsiders.
“Entrepreneurial talent doesn’t necessarily run in the bloodline,” Greif says.
Perhaps that explains why very few family-owned firms ever make it to the next generation. Only one-third of family businesses successfully survive the transition to the second generation and fewer than 10 percent make it to the third, according to the Owner Managed Business Institute, a Santa Barbara consulting firm.
But those that do make the transition are likely to emerge with an advantage over their competitors that are not family held, said Keely Cormier, the institute’s director of research.
“Families are really great at having a core vision that they pass from generation to generation that can really inspire a business,” Cormier said. “It really helps them to be much more successful.”
What follows is a sampling of L.A.’s successful family-owned businesses.