The Profit

Family business: Trust can be thinner than blood

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The Glock family business drama has a script that's juicer than most: The ex-wife of a man who made billions selling guns accuses him of thieving away the family business.

Earlier this month, Helga Glock filed a federal lawsuit against Gatson Glock Sr., accusing him of charges including racketeering and money laundering. She claims he stole her share of Glock GmbH, the family weapons manufacturing business she helped build decades before the first Glock pistol debuted in 1982.

The lawsuit, filed in Atlanta near the Austrian-based company's subsidy in Smyrna, Georgia, says Helga Glock trusted and relied upon her ex-husband, who allegedly told her she shouldn't be involved in financial matters. She's now seeking $500 million plus attorneys' fees. CNBC's email and calls to Glock Inc. for comment regarding Gatson Glock went unanswered.

"The Glock family soap opera is a tale of warning about what can go wrong in even the most financially successful family business," said Wayne Rivers, president and co-founder of The Family Business Institute.

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Getting to generation three and beyond

A much smaller family business where the owners could do better is Swanson's Fish Market. Despite operating for four decades on the same busy intersection in Fairfield, Connecticut, the store has fallen into major debt.

"Family-run businesses like Swanson's are the lifeblood of our country," said serial entrepreneur Marcus Lemonis of CNBC's "The Profit." He profiles the company in an episode of the show.

Gary Swanson and his wife, Sue, run the fish market. They took it over from Gary's father, and recently the third generation, their daughter Larissa Swanson, started working there.

Larissa Swanson says she is trying to get the business out of debt and hopes to eventually take it over—that's if it can survive. The Family Business Institute notes that only 3 percent of family businesses make it past the third generation.

Lemonis attributes Swanson's troubles to misspending and mismanagement by the owners. The market sits in a great location with a solid customer base that likes its fresh fish and hot soups. Gary and Sue acknowledge that they spend beyond their means on luxuries like a BMW and a boat. They also argue constantly.

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Failures that can trigger trouble

Overly burdened daughter to the rescue!
Overly burdened daughter to the rescue!

Rivers has worked as a consultant advising family businesses for more than a decade. He notes a few common failures that can trigger trouble.

First, not having a clear vision can kill a business. If the original owners weren't talkers, but instead were doers, they likely worked hard and didn't articulate or teach the second generation about how the business functions, or pass along its plan for the future.

Another failure is poor management. Many family businesses don't have formal training, so they might not know how to manage time, people, and themselves very well.

"Most family businesses have a lead from the front mentality" in which they believe they have to be first to arrive at work and to be the last to leave in the evening, Rivers said. "But you don't have to be the first in and last out to get the job done. You just have to work smarter."

Such a mentality can hold back a family business. If the leadership is constantly working, there's no time to mentor or teach current or future employees. Working 100 hours a week because grandpa did it only takes a company so far. Doers must become leaders and managers to achieve big growth.

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Furthermore, many family-run companies don't have the know-how to attract, attain and retain good talent; yet good people are necessary for success. And if a lack of trust is an issue so that a family believes nonrelatives can't serve in places of power, that can create an artificial ceiling of growth that stifles a business.

"If you limit a business, and if you're not growing and you become complacent, you die," Rivers said.

Watch CNBC's "The Profit" with Marcus Lemonis Tuesday at 10 p.m. ET/PT for the full story of Swanson's Fish Market.