Published on December 18, 2017

The following symptoms indicate your family business may be in need of professional succession planning. Why? All of these symptoms mentioned below can place an incredible emotional and financial burden on your business. Experiencing any of these symptoms can make your business worth less than you think.

If you have founded a family enterprise, and committed to retaining your family and business culture for future generations, you need to be aware of nine warning signs and five essential resolutions that will help you maintain your business for generations to come.

As a family and owned and owner managed business founder you are aware of the statistics that suggest that family businesses rarely succeed after the second generation. There are many reasons this occurs such as family employees have a self-entitlement attitude, compensation levels not aligned with the responsibility and position, and disconnected vital employees.

 Also, some employees including family may not have the commitment, motivation, or capacity to handle the job they are doing presently. Often, professional organizational assessments are neded, personal baggage finds its way to family business meetings, and some non-working spouses feel that they are under-compensated and not appreciated.

The following symptoms are an indicator that there are problems on the horizon that can potentially destroy the foundation of the business that took years to build successfully.

  • You would like the assurance of full fee disclosure and fiduciary compliance with your firm’s employee benefits package. Can you be held responsible for DOL violations? Should you implement a discretionary bonus structure for vital employees? Your 401k is not acting as an employee retention tool.
     
  • Unanticipated eldercare expenses such as funding long-term care for your parents and your spouse's parents. What about you? Costs can exceed nine thousand dollars per month. You as the business owner are the more financially successful sibling and more likely to contribute to the care of your parents.
     
  • You would like to keep your business culture for generations to come. Some family members want to cash out. Your best clients would like you to maintain your personal touch.
     
  • How to allow each stakeholder to voice their opinions about strengths, weaknesses, and opportunities without family retaliation or bullying.
     
  • Inadequately prepared successors – grooming the next generation into responsible management.
     
  • Strategic planning – where the company is going to be three to five years from now.
     
  • Lack of communication and trust. Your family time is suffering. You do not have any quiet personal time.
     
  • The impact on your business if you lose your top two or three customers. What happens if the company can no longer support all salaried family members?
     
  • How to find out about possible discriminatory problems or potential ethics scandals in your firm that you may not be aware.  Situations that your managers and or employees do not want to mention out of fear for their job.

The nine concerns discussed above can be broken down into five resolution categories that once addressed and implemented will bring sustainability to your business. They are as follows:

  • Preserving Your Business – How to keep your business culture for generations to come.
  • Protecting your assets – How to coordinate your personal and business assets.
  • Celebrating Your Family – How to synchronize company communication and a family governance strategy.
  • Creating your legacy – Are your family’s values defining how wealth is perceived as well as your business culture?
  • Educating your successors – Do your successors know the difference between wants and needs? Why business ownership is not an entitlement.

Professionally implementing the five steps above will refine and summarize most of one’s family business concerns and once committed to the process will help alleviate the top nine concerns.

Please feel free to contact me for further information.

Michael L. Chindamo, Founder Fautores Family Offices www.fautores.com [email protected]