By now, it’s a familiar statistic: nearly two-thirds of family-owned businesses do not survive the founders’ generation. And while that appears to be a bleak figure, research bears out that family-owned companies overall typically have qualities that give them the edge over nonfamily ones.

Many studies have been conducted to determine what contributes to long-term, family-owned business success, and what factors are prevalent in those that fail to make it past the second generation. Here are some commonly held findings to help you understand what makes or breaks the family biz, in order to sustain your own entrepreneurial success for generations to come.

Long-term perspective, but short on strategy

Family businesses have an uncommon commitment and a deep responsibility to keep their companies going. They’re in it for the long haul, and with so much at stake, they typically have a greater incentive to work through conflict, maintain unity, and preserve the wealth. What’s more, growing up in a family business more often than not creates born leaders who have a sense of the company and a passion for the business that outsiders cannot match. All these traits add up to competitive advantages.  

Ironically, despite their long-term aspirations, many fail to plan for succession, a key factor for survival. The growing trend to retire at an earlier age only compounds the dire necessity to ensure that a sound managerial transition plan is in place. 

Good at the basics

A track record of taking care of its human capital is often a hallmark of family businesses. Because they view employees as a long-term resource, they tend to generate loyalty and are less likely to resort to layoffs in a downturn. This attention to the importance of employee assets can yield big returns in reduced turnover and higher productivity. 

Agility is also a fundamental attribute. When it comes to decision-making, tightly controlled family companies can typically move faster than big corporate bureaucracies, a noteworthy advantage in today’s business world.

Their additional competitive advantages can include higher quality service and stronger customer relationships, both essential foundations for success.

An aversion to risk

Family businesses are indeed performance oriented, however, the focus is on long-term performance. Consequently, this perspective on long-term capital, in order to provide for succeeding generations, is a balancing force for the short-term perspective held by many financial markets and institutions.

They’re also strongly cash-oriented. As a result, their debt tends to be comfortably low while their risk aversion is inordinately high. Because they’re willing to build a business over time, they’re willing to reinvest heavily in their company to make it stronger before it becomes more profitable. Their investments generally may not offer rapid returns, but do yield good, solid returns over time. This can mean that their businesses aren’t as wildly successful in prosperous times, but it helps to ensure survival, with healthy profitability, over the long term.

Growing with governance

A family’s principal members must be both active stewards of their assets and responsible owners. The best-run operations understand the need to establish a strong system of checks and balances. Through good governance, such companies put into place formal structures to both ensure its professional management and support the family’s ongoing commitment to carry the torch.

Some of the key examples of good governance include building a strong board to provide the family business with valuable outside perspectives, and creating standards that promote meritocracy, whereby family members must earn and prove their management competence. It’s important to operate with a merit system that reinforces expectations, encourages work experience outside the company as well as experience gained from starting at the bottom and working upward, and provides training on how to be responsible owners or managers.

Other issues addressed by formal agreements include rules for handling conflict, planning for an increasing number of heirs, accommodating shareholders or restricting share trading, and teaching successive generations how to be effective owners.

With clear guidelines and procedures in place, families can better focus their efforts on long-term success strategies.