Running a family business is one great way of generating income, preserving wealth, and meeting the interest of your stakeholders. Even so, sustaining one might be challenging, especially for future generations who may not uphold the same principles as the founders.
Poor business practices and family dissonance are among the challenges that stand in the way of business sustainability. Furthermore, unhealthy relationships in the family can be significant barriers to success, and which can continue through many generations. With that in mind, here are a few vital initiatives to help you achieve a sustainable family business:
- Work With A Family Wealth Management Expert
Having a family business doesn’t mean only relatives should be involved. There are situations where you’ll need help and guidance from an outside party or an expert before making critical decisions. Doing so can be an incredible way to give the business a reality check. For instance, you may need to seek support from tax and accounting experts before expanding your family business.
While the business is passed down from generation to generation, the newly appointed leaders might search for different ways of growing the business. That’s why it’s crucial to seek help from family wealth management experts as they know how to navigate the process without compromising on the non-negotiables.
- Create A Succession Plan
To sustain a family business and its legacy, you need to develop a family leadership and succession plan without delay. Otherwise, it’ll be doomed to fail.
Developing a succession plan at the early stages of starting a business is crucial in leaving a sturdy legacy. At the same time, others believe that it’s a distraction. Nevertheless, it’s prudent that you develop one after the business is deeply rooted.
The said plan should specify when and how the business will be passed down to the heirs. It should also outline the responsibilities of the outgoing family members, including their rights and stakes in the business. However, to prevent disputes, you can enlist help from a legal advisor.
- Develop Strong Governance And Oversight
Family businesses sometimes require a third-party oversight authority, one who’s not a family member, to avoid a scenario where family members make irrational decisions.
It’s also prudent to have a board of directors to represent ownership and oversee the business. They’ll concentrate on business matters, including business plans, succession, organization, and performance oversight. Their primary role is to represent the needs of all shareholders.
On the other hand, you may want to have a family council to deal with the issues that emerge in the family-owned business. Its mandate will be to govern family networking, communications, dispute resolution, personal and general family member investment goals, inheritance planning, and ownership relations. They’re also expected to establish guidance for the board concerning family business ideologies, culture, and preferences.
- Have A Straightforward Means Of Conflict Management
Conflicts are inevitable in any family business. There are often issues or clashes that arise between employees of any company, in most cases with financial management. The truth is that many family businesses don’t have sound processes for dealing with such difficulties, causing them to shut down.
If you want to establish and maintain a family business, you must create an ideal conflict resolution strategy and implement it strictly.
- Develop Ownership And Shareholder Agreements
One reason family businesses fail is due to a lack of an agreement or a will concerning the heritage of the business.
When it comes down to sustaining a family business, the founders must come up with a comprehensive shareholders agreement and framework of wealth turnover to the next generation. This will help prevent conflicts in the family, as well as lead to better accountability and transparency.
- Coaching And Mentoring
To sustain your family business, you’ll need to mentor the generation that’ll inherit the business. These people need to learn the daily operations, as well as have a deeper understanding of the business. Therefore, they should be nurtured, guided, and trained to pick up mistakes and take the family business to another level.
- Document The Story
If you want to sustain your family business, ensure you document the history behind the enterprise. Learn how it started, its vision, mission, core values, and the development of the business from inception until now.
You can record the stories of the family business. Then, you may narrate these stories to the heirs during family gatherings to inspire them to be committed and dedicated to sustaining the business. It’d be best if you constantly shared these values and visions to create warnings about compromising business growth or the capacity of the future generation to take over the family business.
Conclusion
Sustaining a family business is easy if you possess the right knowledge and skills. It’d also help if you consider the above core initiatives to create a sustainable plan for your business, which will yield substantial outcomes. When executed properly, it’ll enhance your business decision-making and engender the ownership group.
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