Expert Talk: Family Business Success

**Redistribution of "Expert Talk: Family Business Success" post created by Peter Ankeny of Wolf Pine Capital on April 29, 2025 for his blog "Expert Talk." Through a question and answer format, Greg Romero shares his perspective and experiences working with family businesses.

Family businesses are weird. And I mean that in the best possible way. They’re these fascinating ecosystems where Thanksgiving dinner arguments can somehow transform into boardroom decisions. Where your cousin who couldn’t organize a birthday party might suddenly have voting rights on your company’s five-year plan. It’s gloriously messy, often successful, and always, always complicated.

I’ve been thinking about this a lot lately. How do these businesses (which make up something like the backbone of our entire economy) navigate the strange waters where blood and business mix? When your CEO is also your dad, traditional business advice feels… well, insufficient.

As luck would have it, I met Greg Romero on a cozy 4-person gondola while skiing this spring. Talk about a captive audience. He’s the founder of Romero Solutions Group and has this rare combo of actually growing up in a family commodities business and later running a different family manufacturing company. He has literally sat on both sides of the dinner table/conference table hybrid that defines these businesses.

I wanted straight talk about the problems facing family-owned companies – not some sanitized corporate-speak, but real insights from someone who’s been in the trenches. Our conversation dug into everything from why founders struggle to release control to how these businesses tend to lose their scrappy spirit by the third generation.

Q&A with Greg

Q: What are some of the most common challenges that family business owners face today?

Greg: There is a lot to choose from here, so let me speak to a few.

Financial management and oversight often proves challenging for owners of closely-held businesses. For example, I often observe business leaders managing cash flow by “gut feel” instead of through (often simplistic) analysis of revenue and cost cycles, potential cash cushion needs (e.g., planned or surprise CapEx, emergency funds), and profitability thresholds before owner distributions. While companies don’t need to go overboard, there are efficient ways to set up cash flow parameters.

Another challenge or “trap” I tend to see is where leaders become complacent operating their businesses with minimal structure. As an entrepreneur or young business, it is critical to operate efficiently, but this often takes a toll on leadership, leaves the business running inefficiently, and limits potential scaling opportunities. I like to call these opportunities to further “professionalize” the business and there are ways for smaller businesses to do so in a cost-effective manner. Professionalism touches upon operations, people systems, financial management, governance, and organizational effectiveness tools/measures.

Q: What do you think causes the “rags to riches to rags” paradox in some family businesses, and how can it be avoided?

Greg: Your quote illustrates a family business that fails or is struggling by the 3rd generation. A commonly used statistic states that “~70% of family businesses fail by the 3rd generation.” Unfortunately, I believe the 70% stat also includes cases where a family business is bought by private equity or a strategic buyer, so it’s a bit misleading (i.e., not just about failure).

With that said, let’s walk through a few factors that can reduce the chances of successfully handing a family business onto the next generation.

Over time, a company can lose its “entrepreneurial spirit.” Founders are known for doing whatever it takes to make their “vision” a reality. They are 360-degree problem solvers and risk-takers, who often rely on “sweat equity” as they lean into their vision. Subsequent generations in leadership roles may not have the same passion for the family business and the founder’s vision, which is critical to ongoing survival and success.

Another related factor involves the failure to adapt to evolving markets (e.g., consumer tastes and preferences, technology changes, etc.) or competitor moves. These companies need to consistently have their heads on a swivel to understand the world changing around them, to have an adaptability mindset and an operational structure able to pivot to new opportunities.

It is also important to highlight that younger generations have found more professional opportunities outside of the family business over the past 30-40 years. This means they increasingly see the family business as “plan b.” In certain cases, private equity and strategic buyers have stepped in to fill the gap of reduced next-generation interest in buying the family business, or where there is no next-generation. As a counterpoint, there has been renewed interest from recent college graduates in joining the family business, likely due to a tighter job market, the potential for more fulfilling and stable work, among other factors. Whether this counter-trend continues is yet to be seen.

Finally, it is worth noting that family business matriarchs or patriarchs sometimes fail to help the next generation transition effectively into leadership positions. Whether consciously or subconsciously, the elder generation can find it hard to step back, prepare the next generation effectively, and provide them with autonomy to make important decisions for the business.

Q: How do you help family business owners balance personal emotions with the need for objective, strategic decision-making?

Greg: An important sales philosophy highlights that people make purchasing decisions for “emotional buying reasons,” not primarily or solely based on logic. This ultimately means that you better understand what really drives people’s decisions. While many examples can apply, I’ll use a singular situational example here.

Business owners often become more risk averse with company decisions as they approach retirement. I refer to this phenomenon as becoming more “introspective” with business decisions. For instance, they may decide not to make CapEx spending decisions that are critical to the company’s evolution in response to changing consumer tastes and preferences, new technologies or competitor moves. Instead, these business owners might be primarily concerned about funding their lifestyle outside of the business, although they might not say this openly, and despite the potential longer-term harm to the business. In this case, it is important that I effectively illustrate the trade-offs and risks, understanding their primary focus is now outside of the company.

Q: What is your process for diagnosing the unique challenges of a family business?

Greg: When performing an initial diagnosis of a family business, it is important that I not only analyze the business’s health, but also assess where family-in-business dynamics may come into play. In situations with multiple family owners, leaders, employees and/or other stakeholders, it is critical to understand which voices influence company decisions, and to what extent these collective voices can agree on business decisions.

At one end of the spectrum, you might have a company founder who makes business decisions with near full autonomy. In such cases, my diagnosis focuses squarely on business improvement opportunities, accounting for the owner’s unique goals, needs and wants.

In other cases, family businesses might have multiple family owners, leaders, and/or other decision influencers, but these key stakeholders can make practical business decisions together. A diagnosis gets a bit more complicated here, as my solutions need to carefully weigh the needs and wants of multiple stakeholders.

At the other end of the spectrum, you may have material infighting among key family stakeholders. If it becomes clear through my diagnosis that various key stakeholders have very different needs or expectations for the business, it is a red flag that they will not be able to agree on any solutions I might design for the company. As such, I would likely recommend the family work with a family business governance specialist as a starting point.

Q: What practical steps do you recommend for professionalizing a family business?

Greg: I actually have a workshop that teaches closely-held private businesses how to further professionalize, so let me share how the workshop is structured.

First, let’s define professionalism. I define professionalism as “an approach to managing your operating rhythms that is organized, clear, and repeatable in order to effectively execute upon your company’s big-picture objectives.”

Next let’s consider a few common reasons why leaders seek to professionalize their business further. Maybe they want to improve longer-term business sustainability, create a more adaptable and nimble organization, improve efficiency and performance, or create a healthier culture.

For purposes of my workshop, I assess professionalism based on five key pillars (each with various sub-factors). These pillars include:

• Functions, systems, and processes

• Governance structure

• Organizational effectiveness

• Organizational health

• Financial Health

Since each workshop includes only a single client, I begin by helping a particular client understand what it means to further “professionalize” their business. I then walk each client through an interactive framework where we baseline their current state of professionalism using a numerical rating system. We then develop and prioritize target improvement initiatives based on relative effort vs. impact of each potential initiative. Finally, we develop a high-level change roadmap based on initiative prioritization.

If requested, we can then help these businesses with detailed planning and execution services, although these steps fall outside the scope of the workshop.

For companies above a certain size – say $3-5 million in sales – it typically makes sense to perform a more bespoke and intensive diagnosis, although the underlying pillars of professionalism remain the same.

Q: Can you share an example where your tactical problem-solving approach led to significant operational improvements?

Greg: For a little background color, my client engagements can take different forms, including purely project-based work, a mix of advisory and project work, or advisory only.

In one case, I signed on with a client for a defined set of initiatives. At one point in our engagement, my client confided in me that they were concerned about their bank account balances given the cost of necessary upcoming equipment upgrades. When I asked my client how they managed cash flow today, it became clearer that there never had been a proactive approach.

So, I created a comprehensive cash flow model for my client to use going forward based on an assessment of the company’s revenue and cost cycles. The model I created helped the owner identify and maintain appropriate minimum cash cushion thresholds before considering a potential distribution. The cash cushion categories include operational cash flow variability, planned CapEx, financing activities, and a small “supplemental” (i.e., emergency) cushion.

So What Does All This Family Business Stuff Actually Mean?

Here’s what I’m taking away from my chat with Greg: family businesses are caught in this fascinating tension between chaos and structure. The chaos is often what makes them special—that founder energy, the willingness to bet the house (sometimes literally) on a vision. But then, ironically, that same beautiful chaos eventually needs some guardrails before it drives the whole enterprise off a cliff.

I’m struck by how many businesses are still running on vibes and gut feel. Like, actual multi-million dollar operations where the “cash flow management system” is basically checking the bank account and hoping for the best. No judgment! When you’re in the daily grind of keeping customers happy and products moving, financial modeling isn’t exactly sexy work.

But Greg’s point about “professionalizing” these businesses without killing their spirit? That’s the money insight. It’s not about turning your quirky family operation into some soulless corporate clone. It’s about adding just enough structure so your entrepreneurial magic can actually survive past the founder.

The reality? Today’s next-gen has endless career paths beyond the family business. From startups to digital nomadism, the automatic succession plan is increasingly rare. Whether you’re the founder reluctant to let go or the heir trying to modernize without causing family drama, having a structured framework makes all the difference. With the right approach, your business might just defy the odds and thrive for generations to come.

Need help with wealth management strategies for your family business? Contact Wolf Pine Capital to schedule a consultation and ensure your business succession and financial planning are properly structured.

About the Expert:

Greg Romero is the Founder and Principal of Romero Solutions Group, specializing in family business advisory services. With experience both growing up in and later running family enterprises, he helps owners navigate the unique challenges at the intersection of family and business through strategic planning and operational improvement.

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Thank you for joining us as we chronicle our journey.

Sincerely,

Greg Romero

Founder & Principal

Romero Solutions Group