Why some businesses last for generations – and others do not

Traditional research into success factors, which began in the early 1980s, was long based on monocausal, isolated analyses of individual success factors. “Critics rightly argue that entrepreneurial activity, the organisation of companies and the unpredictable dynamics of the market represent a process far too complex to allow individual success factors to be singled out,” says Dr. Alexander Schaeff, Senior Research Fellow at the Ferdinand Steinbeis Institute in Heilbronn, with conviction. Anyone who does so nevertheless runs the risk of oversimplifying matters or isolating factors that can only have an effect when interacting with others.

In its study, the FSTI team uses Qualitative Comparative Analysis to systematically analyse combinations of success factors, taking into account that different paths can lead to success. Unlike statistical methods, which aim for generalisations, this case-oriented approach focuses on the individual case and its complexity. Twelve long-standing firms, which have been family-owned for at least three generations, have been examined to date. The collection of quantitative data and qualitative interviews conducted with the owners enabled a comprehensive analysis of the patterns of success.

The key levers of success in practice

The systematic analysis revealed two distinct but equally successful combinations of strategies for longevity. This finding is of enormous practical significance, as it shows that there is not just one path to success, but that various strategic approaches can lead to the desired outcome.

Strategy 1: The value-oriented generational pact

The most successful strategy, with a raw coverage of 76.3 per cent, combines financial independence with successful succession planning, strong leadership skills and a clear focus on values. This combination dominates among the most successful long-standing companies and provides the strongest explanation for long-term success.

In practice, this means that these companies consciously forego short-term profit maximisation across generations and instead invest in staff training, modern equipment and research. They develop clear corporate values that serve both as a guide for management’s decision-making and as a point of identification for staff and customers. These values are not merely seen as a marketing tool, but shape day-to-day operations and strategic decisions.

Succession planning in these companies is not left to chance but is systematically prepared over many years. Potential successors are involved in company management at an early stage, receive comprehensive training and often gain external experience before taking on leadership responsibilities. Great importance is attached to ensuring that successors are not only professionally qualified but can also embody and uphold the company’s values.

Strategy 2: The innovation-based resilience path

This strategy combines financial independence with a strong capacity for innovation and the development of exceptional business models (raw coverage: 51.3 per cent) or, in the case of less optimised succession planning, with strong entrepreneurial values (raw coverage: 34.2 per cent). Although this strategic path is less common than the value-oriented strategy, it demonstrates clear success.

Companies following this path are characterised by a distinct ability to recognise market changes at an early stage and adapt their business model accordingly. They are prepared to make even radical changes without abandoning their core competencies. They invest continuously and at an above-average rate in research and development – even in economically difficult times.

A key characteristic is their willingness to experiment with new business models. Established structures are deliberately questioned, and new paths are actively pursued. At the same time, these companies possess the financial stability to withstand failed experiments. This combination of risk-taking and financial security enables them to capitalise on market opportunities that more conservative competitors fail to recognise or are unable to pursue.

At the same time, this strategy demonstrates that sustainable success is possible even with less-than-optimal succession planning or the use of external executives, as other success factors compensate for shortcomings during the generational transition. A particularly strong capacity for innovation, as well as a distinct corporate culture that endures even without family continuity in leadership, are crucial for offsetting this weakness.

The essential foundation: Financial independence

One finding from the analysis stands out in particular: financial independence proved, with 100 per cent consistency, to be a necessary prerequisite for long-term success. Not a single one of the successful, long-standing companies examined was heavily reliant on external financing. This underscores the fundamental importance of financial autonomy for the survival of companies across several generations.

This financial independence manifests itself in various specific management practices. The companies examined are characterised by low dependence on banks, which they achieve through continuous equity accumulation. In doing so, they deliberately refrain from excessive profit withdrawals and instead reinvest in the company. This strategy enables them to build up financial reserves for times of crisis and develop long-term strategies without being under the pressure of short-term financing constraints.

The continuity this enables constitutes one of the most important success factors, understood as a core-competence-oriented long-term strategy with low dependence on banks. Particularly noteworthy: the average tenure of management in family businesses is four times longer than in listed companies. This continuity in leadership makes it possible to develop long-term strategies and implement them consistently.

Values and virtues: More than just marketing

With a consistency rate of 95 per cent, a commitment to shared values and virtues also proved to be a virtually indispensable condition for longevity. This high level of consistency demonstrates that value-oriented corporate management is not merely a marketing tool, but a fundamental success factor for centuries-old companies.

Andrea Fuchs, Research Fellow at the FSTI, explains: “Behind this abstract concept lie concrete management practices that manifest themselves in various areas of the business. This is particularly evident in the employee-oriented approach of the companies studied.” They invest above average in the training of their staff and offer above-average remuneration. Even in times of crisis, they refrain from mass redundancies and base their recruitment decisions on alignment with the company’s values.

A detailed analysis of the value structure reveals particularly high levels of reliability, sincerity and modesty. These virtues not only shape the internal corporate culture but also determine how the company interacts with external partners. The companies studied maintain long-term relationships with customers, suppliers and their social environment, which often last for decades or even generations.

Longevity as a learnable skill

The study clearly shows that centuries-old companies are not the result of chance, but rather the outcome of systematic management practices. This proves that longevity is a learnable skill that can be achieved through conscious decisions and consistent implementation.

For entrepreneurs, this is both an encouraging and a challenging realisation. Encouraging, because there is not just one path to long-term success. Challenging, however, is the realisation that certain fundamental principles are indispensable and must be consistently implemented. The greatest challenge lies in putting this into practice over the course of decades. It is particularly difficult to stay the long-term course when short-term temptations or external pressure distract from strategic goals. Centuries-old family businesses have proven that this consistency is possible and pays off in the long run. Their experiences offer valuable lessons for all entrepreneurs who wish to steer their businesses towards a sustainable future.

Entrepreneurial longevity is only possible through the simultaneous mastery of the identified necessary success factors and is therefore associated with considerable complexity. A one-sided focus on a few key figures or dimensions of success – such as quarterly profits or market capitalisation, as is often practised by salaried management – is not sufficient to ensure the long-term survival of a company. Against this backdrop, a company-focused valuation perspective, as well as the application of identical valuation criteria, proves inadequate, particularly as it fails to recognise the specific achievements of smaller, often family-run businesses that have successfully navigated this complexity across generations. The study therefore suggests a nuanced approach to assessing the performance of smaller, often family-run businesses.