By Dave Driscoll
Family-owned businesses thrive on pride, tradition, and dedication. Often, the business depends on multiple family members and vice-versa. Although approximately 70% of family-owned businesses hope to transition to the next generation, nearly 43% do not have a succession plan according to the Conway Center for Family Business.
Honest communication about expectations and abilities can help your family business survive and be relevant into the future.
- Ask intentions early and often
Don’t assume that the next generation does (or does not) want to participate in the family business. Ask whether they are interested, and revisit this conversation often as they mature. If an individual does not genuinely care about the business’ product or purpose, he/she will not be fulfilled working there just because it’s the family thing to do. Do not make offspring feel guilty or disloyal if they choose to pursue another career path.
- Don’t assume younger generations know the business inside out
When children grow up hearing about the family business day in and day out, it’s easy to assume they know the fundamentals. But remember, they were not involved when the direction of the business was determined. Regularly review the overall mission and standards that guide the business – this is also a good reminder for those who have become bogged down in the daily grind. Teach younger generations the processes and operations responsible for your company’s success, preferably by having them work their way up through the ranks.
- Don’t protect/hide bad habits
Maybe there are skeletons in your company closet that don’t paint other family members or the company in the best light. Protecting unsavory behaviors only leads to bigger problems. Address any issues promptly to ensure the future health of the business.
- Don’t keep family who aren’t working on the payroll
Are there family members on the payroll who don’t actually come to the office or perform a needed function? Stopping this practice may be unpopular within the family, but allowing it to continue breeds resentment between employees (family and non-family) who do work hard and contribute to the company’s success.
- Determine strengths and weaknesses
Objectively assess the abilities and challenges of family members, just as you do with any employee. Family should only be promoted if they meet the qualifications expected of other candidates. Capitalize on strengths and offer training to build skills as needed. Allow future leaders to begin making decisions and support them through the inevitable mistakes. If a family member does not have potential that benefits the business, encourage them to find their niche elsewhere.
- Involve younger generations in strategic planning
Long-term strategy is not always obvious when focusing on daily operations. As you review and set goals, be sure to include younger generations. Their fresh perspectives may highlight new opportunities for growth.
- Bring in qualified “outsiders” to fill necessary roles
Forcing family members into roles they are not suited for can have disastrous results. For example, if someone’s expertise is in operations, do not ask him/her to lead marketing initiatives just because that role is vacant. Supplement your team with employees who have the competence to help your company thrive – regardless of their DNA.
- Anticipate and plan for industry trends and customer needs
Regardless of the commitment and talents of your family, your business will not survive long-term without adapting. Consider how your product or service fits into industry trends and shifting cultural norms. How are your customers’ needs changing? What additional problems can you solve for your clients?
- Prioritize continuity of values and corporate culture
Your company’s success is not solely because of your fantastic products or services. Don’t underestimate the importance of community relations, charitable contributions, and other ways your values are lived through your business. Ensure future generations realize this is a responsibility of success and this generosity does influence buying decisions and community support.
Open communication and honest assessments will increase the likelihood that upcoming generations can effectively lead your business into the future. Be sure to formalize these plans and expectations into a succession plan that is updated regularly.
Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or (314) 303-5600. www.MetroBusinessAdvisors.com