Family businesses are the lifeblood of almost every economy. Recent statistics suggest over 5 million family-owned businesses in the UK. The swiftly changing economy means families must be more adaptable, develop quicker and become far more professional in practice to succeed. Factors like complicated relationships, conflicts, and ownership issues can disrupt business or run it to the ground. Consider the tips below to keep the business in the family for generations.
1. Think long term
Ensure that the company’s sustainability is not jeopardized for short-term profits. This means prioritizing long-term goals and objectives instead of short-term desires to please public shareholders. This will position the company to generate higher long-term returns if the risk is properly assessed. Taking the long perspective gives the firm the best chance of weathering many storms, such as economic downturns, crises, and industry upheaval over time. Family businesses must focus on the next generation rather than the next quarter. This way, they are more likely to develop strategies that prioritise customers and maintain a positive relationship such that they keep coming back.
2. Have a succession plan
Family-owned firms must consider succession as an ongoing process that will set the roles and duties of all successors. Before succession occurs, present family members should consider who does what and turn to predecessors for good mentorship. This facilitates the transfer of in-depth knowledge about the firm to relatives who will take over from them. Having a strong succession plan will ensure a seamless transfer. For instance, a farm business may require drafting and maintaining a succession plan to guarantee your legacy is effectively passed down. However, certain taxes may be applicable, so you can speak to a life insurance provider to learn how to reduce the tax burden on the family and business.
3. Infuse family values into the business
Values are very important in family businesses. Interactions between families and businesses frequently reflect family values, resulting in distinct family company cultures. A family-owned business can gain a competitive advantage when built around strong values. A 2011 research outlined the qualities that led to the success of major family enterprises like Cargill, IKEA, and others. These principles are sometimes described informally as “the way we do things,” They are used to drive corporate decisions and strategic planning.
4. Create a plan for dispute resolution
A 2015 PWC Family Business Survey mentioned shareholder agreements as the most common tool for dispute resolution. Establishing standards for everyone allows family leaders to assess if employing family members in question serves the best interest of the business and family. Future generations are better prepared to move forward when the founder’s objectives for the business’s future and strategic direction are well-known and conveyed. For example, discuss decision-making duties, expected roles for future generations, and the need to retain family ownership to secure the business’s long-term future.
Family-owned enterprises, compared to their peers, confront many hurdles. Aside from having to keep up with the changing times, negotiating challenging family ties can drag corporate progress. Consider the tips above to ensure smooth operations for many years.