Many people may be unaware, that globally the most popular type of business ownership are family businesses. Almost 90% of American outfits are family owned or operated, and while in Australia ‘family business’ isn’t specifically defined making data less exact, it’s estimated at 70%. Nonetheless, it remains a vastly popular operating structure yet faces a number of challenges and objectives due to its unique configuration. If you’re considering this as an option for yourself, whether it be buying a franchise for sale, setting up a new operation yourself or assuming management of an established company, consider some of the factors below to assist in your search.
Develop A Growth Strategy
Regardless of the industry, the best family businesses to own will have a plan that strategically considers the current state of the business and links it to where it wants to be in the future. Having the mindset of success and ambition is not quite enough to realize long term growth, so take the time away from the everyday running of the business and turn your attention to some detailed forecasting and planning methods if a strategy is not already yet in place.
Balance Your Family And Business
The next factor to consider is the competition between the needs of the family versus the business. A recent KPMG survey discusses the challenge of these balancing acts and notes that when there’s undue emphasis on either the business or family within the operating context, it will typically result in conflict or a weakening of both business and family goals, often correspondingly. In this instance therefore, the best practice is to seek solutions and goals that compliment both these spheres alongside each other, rather than in opposition. Finding this balance largely resides in a business’ ability to facilitate its internal communication. This could involve the implementation of mechanisms such as Family Constitutions, shareholder agreements and the development of documented policies and procedures to enhance the business’ performance and specify its boundaries and priorities.
Welcome Different Perspectives
Another characteristic of successful family businesses is that they tend to benefit from a diversity in their leadership. This is especially seen with gender diversity and the incorporation of direction from those which are non-family members. When a multitude of perspectives can be assembled and utilized, there is an increase in innovation and problem solving abilities as the management team can see beyond a narrower socio-cultural context that is more likely with family only governance.
Implement A Succession Plan
Finally, it’s best to leverage the long term outlook that family businesses traditionally adopt as they seek to provide for their future generations. Besides the increased professionalization discussed above, another important aspect of a well-run business of this nature is that it will also have sufficient and clear succession planning in place. Even though family members typically spend longer at the helm, KPMG asserts that the peak of family businesses occur with CEO’s (or equivalent) aged 51-60, then decline as age 70 is reached and exceeded. Acknowledging this ahead of time will allow for appropriate discussion of options to manage a transition of leadership.
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