The journey of family-owned business begins as a strategic long-term endeavour and its successful outcome will impact the earnings of future generations. Successful businesses usually seek steady long-term growth and performance to avoid risking the family’s wealth and interests of all stakeholders.
There are several crucial elements in the success of the business:
Having a well-defined mission and vision statement at the inception will help mould the family’s core principles and values in the long run. The goals and objectives of each stakeholder group may be different to one another at different times. The stakeholder groups include senior members of the family, young generation, immediate and extended branches, and related party organisations. Aligning business objectives with the overall interests of the family ensures a positive outcome.
Businesses will be affected not only due to poor performance but also from lack of proper communication between members. There should be clear distribution of authority and responsibility between members taking care of operations, decision makers and silent stakeholders. Establishing a hierarchy with authority matrix will reduce any misconception while exercising authority among family members. This is important to sustain both the financial interests as well as the harmony of the family over time.
It is normal that the business may tend to focus more on meeting the current needs of the stakeholders. Families tend to grow at faster rate than their wealth over time and as a result their spending power tends to increase. To accommodate future generations and overcome wealth depletion, new leaders must not only be able to safeguard existing wealth, but also actively identify or create new sources of wealth and increase its total asset base.
A successful family recognises the need to actively manage the development of future leaders and commence with the process early. This includes investing in education and personal development of future family leaders, requiring experience outside the business, seeking advice from third parties, encouraging involvement from all members including younger generations, understanding changing motivation and needs of stakeholders.
One of the challenges is when the transition process moves towards change of leadership. Having clear objectives and formal structure in place will provide a roadmap to this process ensuring consensus. This includes handover timeframe, selections based on success criteria and approvals made by decision makers. Having these clearly defined and structured will assist in smooth transition process.
The above points are some useful tips you can leverage to run your family-owned enterprise successfully. Establishing a family business is an excellent way to leave a lasting financial legacy for future generations.
A collection of articles, trends and thoughts from our consultants at Curia. We strive to provide relevant content that will equip any business owner with information required to improve their business.