According to the U.S. Small Business Administration, 90 percent of all businesses in the nation today are family-owned. Such a vital part of the economy should be more carefully nurtured. But statistics show that most family-owned businesses do not have secure futures. The challenges of successful passage from the first generation to the next are slim: Just three out of 10 family businesses survive the transition. Of those that do survive, only half will continue as viable business entities for the third generation of the family.

The size of family businesses ranges from mom-and-pop operations with income to cover the needs of one family to multi-national conglomerates with thousands of employees and multiple facilities. While the types and sizes of family businesses and the relationships among family members differ, the challenges faced by the owners of family businesses are often similar.

Notwithstanding family concerns, two goals predominate in the world of business: success (i.e. profit) and control. Staying focused on these goals where family members are concerned can be difficult or even impossible. And the resulting stress can tear apart both the family and its business. Despite the added stress and complexity of dealing with family members, the ability to stay focused on the goals of success and control is often determinative of whether the family business will survive and succeed.

Unfortunately, the ability to remain focused on the goals of success and control too often eludes the owners of family businesses. In a typical scenario, the founders have built a large and prosperous company that is to be passed along to two members of the next generation in equal proportions. One of the heirs is very active in the management or the company, and the other has little interest in assuming leadership.

As might be expected, the two heirs do not get along and have no desire to work together. But the founders are determined to treat them fairly, i.e., equally, perhaps because they are brothers or cousins, and hope that the arrangement will bring them closer. So control is passed along to them in equal proportions, and the founders cross their fingers in the hope that everything will work out. It seldom does.

Instead of bringing about peace and continuity, the founders have created a ticking bomb, ready to go off when the situation becomes intolerable for all involved. In their zeal to be fair and to resolve the question of allocating control, the founders have lost sight of the question of profit and have set the company on a course toward disaster.

The understandable desire not to favor either heir has overwhelmed their ability to foresee the likelihood of a deadlock, and their lack of vision has doomed what would otherwise be a growing and profitable business. The ability to separate oneself from the stress and peculiarities of dealing with family conflicts while devising strategies for business success and continuity is a difficult but essential skill for the survival of family business.

In some cases, family members who are running the business receive the same compensation as others who have more limited roles and abilities. This can be the result of perceived fairness, feelings of guilt, or even a prevailing desire to "buy peace." In other families, members who were deemed black sheep or go-getters as children are slotted into the business based on these impressions, despite changes in personality that have occurred since childhood.

Some of the qualities that make strong families can make weak businesses.

Long-standing frictions among family members often manifest themselves in confrontations over titles, salaries, responsibilities, decisions to enter new business and investments. These are all vital business decisions that should be made based on what will be most beneficial to the business, not on extraneous factors such as age of siblings, hurt feelings, social goals, etc.

Many important family business decisions are unfortunately made based on outdated or historic impressions. For example, instead of seeing their children for who they are and for their relative strengths and weaknesses, parents often regard their eldest children with special affection and leadership expectation and their younger children with a sense of unease and diminished expectation. Yet it is often the younger children who are better poised to be the leaders of the next generation; it is the rare parent who is able or willing to recognize this and elevate the younger sibling over his or her elders. Similarly, it can be very difficult to convince the owner of a large and successful family business that his daughter, rather than his son, is the far better candidate for assuming leadership of the family's business.

Presumptions and stereotypes aside, decisions must be based on what is most likely to be beneficial to the business. The ability of parents to see their children objectively for their strengths and weaknesses, and to act upon what they know makes the most sense for the business, is a skill that will ensure the success of the family business for generations to come.

Family disagreements often simmer for years, but they most frequently erupt when a business is at one of the following crossroads:

* When the original owner/entrepreneur decides to pass on the company to the next generation.

* When ownership interests become more diverse among family members.

* When ownership or control of the business is transferred out of the family, e.g., feuds often erupt over the distribution of sale proceeds.

The emotions that tie a family together can also pull it apart. When things get out of hand, cooler heads should be called upon to mediate. Bringing in a disinterested third party is often helpful in enabling family business owners to free themselves from the volatitlity of the family and allow business interests to dominate their thinking. In addition, business owners can do several things to help minimize the consequences of family-induced business problems, such as the following:

* Make certain that decisions about the future of the company are made early, not late. The principal owners of the business must make firm decisions about who their successors will be, and when they will take control.

* Document all corporate actions to reflect explicitly the intentions of the owners.

Simmering family disagreements often erupt when a business is at a crossroads.

* Seek outside input into the corporate decision-making process. Like public companies, the board of directors of family-held corporations should include outsiders who can see beyond family-based perceptions and help keep a company on track.

* Integrate each family member/owner's personal finances with his or her business finances to safeguard financial interests.

* Ensure that during key transitions each family member has his or her own lawyer to advocate potentialy divergent positions.

The best way to keep a family business viable and to avoid irreparable missteps is to make decisions based on the best interests of the business. Maximizing the business's potential while dealing fairly with family members will serve everyone's interests in the long term. If there is nothing left to fight over at the end of the day, however, nobody will be happy.

But so long as the family business is properly managed with careful planning based on business--as opposed to family--concerns, the family business can be a wonderful vehicle for bringing families together for generations and creating security and satisfaction for all involved.