Ensure the Longevity of Your Family Business
According to the Family Business Institute, less than one-third of family-owned businesses make it past the second generation of ownership and only 1 in 10 survives through three generations.
Based on a New York Times study of family businesses, here are some tips on how you can ensure your family business survives:
Reinvention. Businesses that continually find ways to reinvent themselves through new markets or new product lines are much more likely to make it through several generations of ownership.
Good succession planning. While succession practices vary – some families hold an election while others rely on a current CEO to choose – the family businesses that continue to thrive are those that pay careful attention to planning for the next generation of leadership.
No guaranteed employment. Hiring family members just because they are family is a recipe for disaster in family businesses. Those companies that have rigorous standards for employment of family members fare better in the long run that those that do not.
Outside counsel. Having outside advisors on the board or as part of a “kitchen cabinet” brings important new perspectives to a family business, and can be used to “shore up” areas where family managers may be lacking in expertise.
These tips for preserving a family business are good advice for any business that wants to keep going beyond the first generation of leadership.
To learn more about maintaining business viability through skillful business planning, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.