In the first episode of our podcast, we discussed the mindset it takes to start and run a small business. In our second episode we sat down with Robert and Matthew Knowles of Knowles Associates to discuss another interesting (but complicated) topic on the other end of the spectrum: successfully transitioning a family-owned business to the next generation. Knowles Associates is a full-service insurance firm serving corporations, organizations, and families throughout 22 states from their corporate headquarters in Northeastern Pennsylvania. Bob Knowles has served as Principal of the firm since 1988. Matt recently joined to start a Cyber Risk business line after spending the early years of his career working in the insurance industry for two major brokerage firms in New York City. He is the fourth generation of the Knowles Family to join the company.
While privately owned family businesses are the engine behind the American economy, responsible for over half of U.S. gross domestic product, employment, and job creation, keeping family-owned businesses intact over time is very hard. According to two 2010 studies cited by Cornell’s Johnson School of Business, the average life span of a family-owned business is 24 years. Only about 40% of U.S. family-owned businesses turn into second-generation businesses, and just about 13% are passed down successfully to a third generation. Only 3% will survive to a fourth or beyond. Whether you own a business or not, you can probably guess a lot of the reasons why mixing family and business can get complicated. Communication problems, lack of interest or skillset, an unwillingness to give up control, and other family dynamics can lead to all sorts of problems.
Bob and Matt discuss how the transition has gone so far, what they’ve learned along the way, and what is next for their firm in the years to come. It was a great conversation filled with lots of interesting topics. Some themes from the conversation include: why being authentic and vulnerable is so important when coming into a situation with long established team dynamics, why building and maintaining a great team is about understanding people’s behaviors and habits, and why values being built into a company’s mission is so important to long-term success. Enjoy!