Cover Edge logo Summer 2004 Cover Story: When 'business' adds relatives, a 'family business' is born
By Ann M. Gynn
Illustration by Victoria Kann

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Family businesses rarely start with the "family." An entrepreneur has a dream, begins a business, then adds family members to help out. "If the business gets very big, it may go on for generations," says Tina Tessina, a psychotherapist and author of "It Ends With You: Grow Up and Out of Dysfunction."

The impact of businesses owned, controlled or run by families is enormous:

  • 80 to 90 percent of all North American businesses are family firms, according to Family Business Review.
  • 78 percent of new jobs are created by family businesses.
  • Family businesses in the S&P index outperform their non-family counterparts in shareholder return, return on assets, revenue growth and income, according to 2003 Business Week research.

"People don't really think about family businesses, but they're so important," says Nancy Dodd, director of the Montana Family Business Program based at Montana State University.

Avi Steinlauf grew up in a family with an entrepreneur for a dad. His father owned and operated a billboard company. He sold it in the mid-'80s, but his thirst for entrepreneurship was not quenched. A few years later he purchased Edmunds, a niche publisher of quarterly buying guides.

As the information industry changed radically in the '90s with the technology revolution, so did Edmunds. Initially, it put its data on CD-ROMs. In the mid-'90s, Edmunds began to dabble on the Internet and by '97 had a full-fledged Internet business, Edmunds.com, within the company.

During this time Avi Steinlauf initially was working for a big accounting and consulting firm in New York City. He left for business graduate school at Northwestern University. Adept in technology, he graduated and had a good job offer from Intel.

"On one hand I wanted to earn my stripes on my own, but I didn't want to risk what was happening in the early (Internet business) years," he says.

Steinlauf opted to work at Edmunds, making his father's company a truly family-operated business. Today, he is executive vice president of the California company, which has more than 90 employees.

"It was absolutely the right decision for me," the 33-year-old says. "No pressure was placed on me. It was picture perfect—being able to make the decision on my own.

"It wasn't a decision I made lightly. We've been able to make it work. I put a lot of time into thinking about the family business."

Steinlauf's father, Peter, holds the title of CEO and chairman of the board. His mom sits on the company's board. His two younger sisters are not involved with the company.

The board on which his mom sits was created a few years ago after Edmunds decided to bring in outside investors, while keeping the company private. The Steinlauf family still owns a majority of the company. However, they receive a lot of value from outside advisers, Steinlauf says.

The family did not consider a formal board of directors or an advisory board when only the family's money was invested. However, once outside investors were added, a board of directors was formed to meet periodically to discuss financial and operating matters.

Experts say family businesses should consider an advisory board even when only family money is involved. The board members should be those who respectfully challenge the family and add value to their roles as business advisers.

"We decided the right thing to do was to hold ourselves accountable in a similar way to a public company," Steinlauf says.

Disclosure to outside investors generally require more formality than when only the family owns the business. However, even with the added disclosures, a private family business has its advantages.

"Family businesses are not distracted by the public markets. They have a sticktuitiveness," Steinlauf says.

Even during the dot-com craze, Edmunds didn't go public. "At the time people thought we were nuts," says Steinlauf, noting the good fortune today of its responsible decision then.

His dad is in his mid-50s so there hasn't been a lot of formalization for succession, though planning for the unexpected has happened, he says.

He notes that he still feels the weight of being the owner's kid, though he has worked to build his own credentials.

Jeannine Fallon, public relations director for Edmunds, says the weight is self-imposed. "There is no riding on coattails here," she says, adding it would be obvious if Avi Steinlauf wasn't pulling his own weight.

At 23, Shane Pliska is director of business development at Michigan-based Planterra, an interior plant service company owned by his father. He joined the company a year ago, soon after graduating from Emerson College.

"If you were to ask me four years before that, 'are you going to work for your dad?' I would have said, 'absolutely not.'

"I didn't understand the value of business until I was in college and after," Pliska says.

He explains that he could have had a decent job in a more cosmopolitan city. But he didn't want to be 10 years down the road in a middle management position at a faceless conglomerate.

"I will spend the same amount of energy at Planterra and some really remarkable things can happen in a 10-year time," he says. "There's no way to replace that sense of responsibility that comes with ownership."

The family business is not the ideal for Pliska. "It's definitely an island I'm on," he says, explaining he doesn't have the opportunity to interact with young, ambitious people daily nor does he have the possibility of being promoted tomorrow.

Pliska says his role as director of business development is new within the company. His dad already had developed a good management team since Planterra's 1973 debut. So he and his father met to discuss what was needed at the company.

The new role brings with it a chance for Pliska to become the new "face" of the company, attending community and business gatherings. He also can tackle business aspects that his father never dreamed of when he decided he wanted to go into business for himself—things like medical insurance, Pliska says.

A member of the most modern generation, Pliska doesn't think that he needed to start at his dad's company by sweeping the floors or driving the trucks, though he does pitch in when a large delivery arrives.

"I don't believe in the phrase, leader in waiting. You lead now even though I have no subordinates," he says.

Employees have responded well to Pliska's arrival at the company. "They gave a sigh of relief," he explains. "It's a token of job security because they realize my dad isn't going to sell the company."

His parents, too, were relieved. "My mom and dad were very happy because it made their retirement plan a whole lot easier," he says.

However, his parents never expected their son to be their business retirement plan. "My dad never asked me to join," Pliska says, adding he thinks the decision to join the family business is more difficult if a child is pressured into it. "The choice has been mine and that's the most important part if you're trying to build a family organization." e