The family business – Part 1

Posted: July 10, 2013 in Family Businesses
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The family owned and operated business is one of the real gems of entrepreneurship. The reins are handed down from generation to generation and it might appear that this type of business will continue and succeed indefinitely.

This thinking it wrong. It takes moxy and chutzpah as well as skill to keep these businesses operating. Many small businesses are unprepared for the inter-generational challenges. After all, the new blood got there by virtue of DNA – not ability or experience. I do not say this to criticize all small business management. I started out, right after university in a family owned business – in management and with no prior business experience. I did not appreciate it at the time but I was getting the same kind of real-world training that many MBA programs offer.

I have been around many small businesses and they have a lot of similarities and (unfortunately) pitfalls:

  1. There is no business plan – just an assumption that the business will be around in the future for family members to join.
  2. The newest members don’t have much if any formal education or prior business experience.
  3. The newest members learn from the incumbents.
  4. Wealth does not automatically accrete. In fact many of these businesses are under-capitalized so the retirees cannot enjoy the fruits of their years and years of labor. This is one reason why small business owners delay retirement for so long – they can’t afford to retire.
  5. There is no real succession planning and as such, no estate planning. So, serious illness or death can have disastrous consequences for the family – not to mention the business itself.

There are many steps that the current generation of family business owners can take to preserve their wealth and help the succeeding generations of business owners.

More on this in a later post.

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