Why planning is harder for family businesses

Does your business represent a personal dream to work for yourself?

Do you plan to find a buyer for your business and retire on the sales proceeds?

Or are you training a successor to carry the business into the future?

Whatever your dream, you need to develop an overall strategy to ensure that your business prospers and meets your family’s needs.

puzzle pieces

Planning is key. Studies show that most family businesses lack written strategic plans. Failure to plan will adversely affect both your business and your family.

The challenge for any family business owner is balancing business demands with family concerns. The balance can be achieved through total family business planning.

Family business planning actually involves four plans:

  • The owner’s plan addresses the owner’s role in the family business now and in the future. It outlines the owner’s personal, company and family goals. The plan also covers financial security issues and the owner’s exit strategy.
  • The family’s plan is focused on the mission of the family business, fairness to all family members and owners, leadership and governance, and the rights and duties of the owners and family members.
  • The company’s plan identifies the company’s strengths, weaknesses, challenges and opportunities and provides guidance to promote the health of the business. The company’s plan is developed to harmonize with the owner’s and the family’s plans.
  • The succession plan facilitates the transfer of wealth, ownership and leadership to the next generation.

All four plans must be considered together.

What are soft-side issues?

Soft-side issues deal with both the interpersonal and emotional issues of running a company. How a business owner handles these issues often determines the success or failure of a family business.

  • Soft-side issues include:
  • Family business mission statement
  • Goal setting and clarification
  • Performance standards development
  • Compensation structures
  • Shareholder agreements
  • Business roles and job descriptions
  • Employment rules
  • Communication counseling
  • Governance
  • Conflict management
  • Leadership transition and succession

What are hard-side issues?

Hard-side issues refer to what are often considered traditional financial services. They primarily deal with financial and tax matters.

  • Tax and estate planning
  • Retirement planning
  • Investment portfolio management
  • Wealth accumulation, preservation and transfer
  • Cash-flow improvement
  • Business profitability consulting
  • Business valuations and structures
  • Mergers and acquisitions
  • Insurance reviews

Why is a family council important?

Family business experts often advocate a family council to help the family sustain effective communication and make important decisions. It serves as a forum in which family members can discuss their expectations for the business and for one another.

The council can include all family members who are vital to the future of the business – the founder or current owner, spouse, children and other family members who have a significant interest in the business. The council will determine what the family wants to accomplish.

  • What is overall vision for the family and the business?
  • Do you want to continue as a family enterprise?
  • What are the guidelines for bringing other family members into the business?
  • What is the role of the business in the lives of family members who choose not to work in the business?

Should you consider executive training?

Family relationships may not translate smoothly into the business environment. Executive training enables a family business owner or the owner’s successor to manage the business effectively, while resolving issues that can sometimes result in conflict among family members and between family and nonfamily employees.

Executive training will help you to develop good professional relationships, build a team mindset, supervise and motivate employees, and establish boundaries between family time and business time.

Should you have a board of directors?

A strategically assembled, independent board contributes to important functions of a business, including selection of a successor, communication, strategic planning, decision making and crisis management (such as the unexpected loss of the business owner). A well-selected board is a valuable resource of contacts and experts.

Our firm can help you address both the hard-side and soft-side planning issues facing your company.