Many family businesses fail in the succession process due to inappropriate planning. In fact, family business is still one of the most popular roots of successful businesses throughout the world. Why? Starting a business from the scratch is not easy. You often depend upon family members for human resources and capital resources. The problem is that family business success can be a challenge when the business grows. Preparing your family members to continue the business is another challenge.
As noted by Rob Clarfeld on Forbes, family business is still dominant around the world. Well-run family businesses tend to endure better. They may perform even better than non-family business counterparts. Family business succession is a crucial part in maintaining the success. As the owner, you need to make sure that your kids or other family members will manage the business well.
Keys to Preparing Successful Family Business Succession
Clarfeld suggests at least two keys to preparing the family business sucession. They are social capital and experienced financial advisor.
Many experts agree that social capital plays important role in deciding whether a family business can thrive through multiple generations or not. The social capital covers many things, from goodwill, sympathy, fellowship, social relations among individuals and relatives, and many more. The social capital develops from deep trusts and shared values that may be different from a family to another.
Social capital is inherent in most family businesses. Therefore, if let unchecked, it may lead to unwanted outcomes. The business is often inseparable from emotional aspects that can influence how the business runs. Therefore, the social capital must be harnessed properly by means of collaboration, interaction, dialogue, and value transfers.
Experienced Financial Advisors
Financial advisors play important roles in planning the family sucession process. Experienced advisors can help in encouraging the development of social capital in the family-owned businesses. Properly developed social capital can nurture and sustain the company through several generations. The advisors deal with the unique dynamics of the family business succession process. They can help the business in many ways, from addressing routine tasks to the most complicated ones. They include:
- Organizing family meetings
- Providing deliverables
- Organizing financial discussion and dialogue
- Setting up agendas
- Enhancing business operational model
- Improving capital structure
- Negotiation, and many more.
Those tasks may sound mundane. However, they are essential for the continuity of family-run businesses. The family members often fail in building effective communication within the family and with outsiders. Therefore, the financial advisors may help in fostering an environment, where communication runs respectfully and productively.
Again, financial advisors play crucial roles in planning the family business sucession. It is particularly true for areas that need technical expertise, such as tax, investment, legal structuring, accounting, and communication. Therefore, make sure to hire experienced advisors, who can understand the existing social capital within the family. They should be able to provide some outside perspective to strengthen the social capital for the business future. This way, the successors of the company will be able to run it even better in the future.