I get asked frequently what is the difference between a family business and a entrepreneurial business, that is in the 1st generation.
In my experience, the key difference between a family business and an entrepreneurial business is how the business was founded. Essentially how the business was started. What I mean by that is, was the intention from the get-go to be a business owner and it didn’t matter the industry? Or was the business developed from a need to pay the bills and support your family, something safer?
Think about it, in the early days, did you leave an employer to go out on your own? Was it because you didn’t see eye to eye with your boss or you didn’t like the way the company treated the employees or clients? That reason, although you probably didn’t see it as that early on, (I know didn’t, when I left my employer and went out on my own), was you didn’t align with the core values of the company or the culture of the company. Something was just off.
In the early days of being on your own, you had the help of family or friends to assist in the areas you were not skilled.
Perhaps bookkeeping or an assistant to help you with client projects. Once your reputation got out, you became busier and busier, you needed to hire full-time help to keep up with the business. Does that sound familiar?
Fast forward it is 30 years later and you have 20, 50, 300 employees.
Maybe you have a family member working in business with you. You have grown children who may or may not be in the business, yet? You may have expanded your services, but you are still in the same industry as when you went out on your own. That is my definition of a family business or what could be a family business. How to Recognize you could be a family business after building your business for 30 years is a topic for another day.
An entrepreneurial business, in my experience, is a business that was built with the intention to grow make money, sell and move on to the next thing, not to just earn a living by using your skills or education. They tend to be founded by an individual entrepreneur or a couple of entrepreneurs who may have identified an opportunity in the market and took the risk to start a new venture. They are generally not related. They may have met at school or at a social function. The objective of the entrepreneurial business is to create something unique that has the potential of significant growth. Entrepreneurs have the exit strategy laid out at the beginning of starting their business, once the growth is achieved they exit and start over.
The only real risk a family business had at the beginning was leaving an employer to go out on their own without a guaranteed income. An entrepreneur’s business took a risk at the beginning and continues to take risks by placing play bets on the future.
Make sense?
Cheers,
Tammy
