When you own a family business, there are two types of challenges you have to deal with; Business Challenges and Family Issues. We will talk about both, this week starting with Business Issues.
Business Challenges
Lack of written strategy. No documented business plan or long term planning. Decisions are made day-to-day in response to problems. No long-term or strategic planning.
Control of operations and compensation problems for family members. Dividends, salaries, benefits and compensation for non-participating family members are not clearly defined and justified. Lack of participation in the day-to-day work and supervision required. Which family members are shareholders vs. daily management. Difficulty controlling non-participating members of the family.
Vision, Growth and Expansion. Each family member has a different vision of the business and different goals. Problems due to lack of capital and new investment or resistance to re-investment in the business. What measures must be taken to grow locally, nationally, and internationally.
Succession Planning. Most family organizations do not have a plan for handing the power to the next generation, leading to great political conflicts and divisions. Problems when the next generation is not adequately prepared for take-over. There are some specific issues related to the third generation.
Business Valuation and Exit strategy. No knowledge of the worth of the business, and the factors that make it valuable or decrease its value. No clear plan on how to sell, close or walk away from the business.
Lack of talent and Training. Hiring family members who are not qualified or lack the skills and abilities for the organization. Inability to fire them when it is clear they are not working out. There should be a specific training program when you integrate family members into the company. This should provide specific information related to the goals, expectations and obligations of the position.
High turnover of non-family members. Happens when employees feel that the family “mafia” will always advance over outsiders and when employees realize that management is incompetent.
Business Challenges
Lack of written strategy. No documented business plan or long term planning. Decisions are made day-to-day in response to problems. No long-term or strategic planning.
Control of operations and compensation problems for family members. Dividends, salaries, benefits and compensation for non-participating family members are not clearly defined and justified. Lack of participation in the day-to-day work and supervision required. Which family members are shareholders vs. daily management. Difficulty controlling non-participating members of the family.
Vision, Growth and Expansion. Each family member has a different vision of the business and different goals. Problems due to lack of capital and new investment or resistance to re-investment in the business. What measures must be taken to grow locally, nationally, and internationally.
Succession Planning. Most family organizations do not have a plan for handing the power to the next generation, leading to great political conflicts and divisions. Problems when the next generation is not adequately prepared for take-over. There are some specific issues related to the third generation.
Business Valuation and Exit strategy. No knowledge of the worth of the business, and the factors that make it valuable or decrease its value. No clear plan on how to sell, close or walk away from the business.
Lack of talent and Training. Hiring family members who are not qualified or lack the skills and abilities for the organization. Inability to fire them when it is clear they are not working out. There should be a specific training program when you integrate family members into the company. This should provide specific information related to the goals, expectations and obligations of the position.
High turnover of non-family members. Happens when employees feel that the family “mafia” will always advance over outsiders and when employees realize that management is incompetent.
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