Ways To Keep A Closely Held Business Alive For Multiple Generations
Added on April 16, 2018
Operating a closely held business can be a complicated matter. A significant amount of these companies fail to make it to the next generation. Statistics show that only 30% of family run companies last to the second generation, 12% to the third generation, and only 3% to the fourth generation. There are a plethora of reasons why businesses fail. However, most failed family owned organizations do not fall apart due to market downturns or a change in consumer behavior.
The single largest threat to closely held companies is family network complications. These obstacles include lack of a shared vision for the business, different passions between generations, vulnerable next generation leadership, and the need for a proper succession plan. The good news is that a great deal of family owned businesses have remained in operation and profitable for the long haul. So without further ado, here are some ways to keep a closely held business alive for multiple generations.
It is important to plan for change. This holds particularly true when it occurs across multiple generations or involves various branches of the family. Long term plans need to be formulated in order to prepare for these changes. For example, it is necessary to define exactly who will be in charge moving forward. A clear definition of the chain of command goes a long way in avoiding family related disputes. The plan needs to outline who will be making the decisions and who will be implementing those decisions. It is also crucial to determine how the business will allocate funds. This includes profit sharing, and calculating the salaries for everyone holding a position in the organization. When financial accountability is written in stone it significantly reduces the chances that family members will fight over money.
Develop Future Leaders
Closely held businesses need to allow the next generation of leaders to make significant contributions to the organization; they are the future of the company. The next generation of company leaders should be able to implement appropriate changes that will help the business grow. It will go a long way in building their confidence moving forward. Family owned businesses must also plan exactly how they are going to groom the next generation of leaders. This should start from a young age in the form of internships that will provide them with hands on work experience.
Set Up Clear Communication Channels
A lack of communication can lead to unnecessary arguments, hurt feelings, and ultimately the downfall of the organization. This can be avoided by setting up clear communication channels. It is particularly needed in a family run business due to the nature of the family element. Many people are under the false impression that they should avoid addressing issues in order to keep the peace with other family members. The exact opposite is true. Unresolved problems tend to get worse over time. Conflicts increase, commitment and motivation decrease, and the work environment is negatively impacted when family members fail to communicate. Clear communication channels must be put in place. They should include how instructions are passed down and how disputes are solved.
Navera Group specializes at developing strategies that secure the long-term financial health of your closely held or family owned business. Our team of industry leading consultants are experts at resolving and managing the unique challenges that your business faces on a daily basis. If you have any questions, or would like more general information about our array of services, please contact us today. Phone: 617-356-7516; Email: Info@Naveragroup.com; Website: www.NaveraGroup.com