Blog 5. FAMILY OWNED BUSINESS (FOB)
According to the Harvard Business Review, 70% of family owned businesses FAIL or SOLD before the SECOND generation has the opportunity to assume ownership and/or operational authority.
Also, only 10% of first generation businesses reach the third generation! While the above statistics are daunting, family owned businesses can survive and grow with, not only, the help of outside management consultants, but also, employing survival skills; such as, refinancing, M & A options, culture changes, generation transfer, including the 50% Inheritance Tax issues.
Although our practice does not directly solicit FOB’s we are forever involved with either struggling small first and second generation businesses and/or thriving FOB’s that have reached a plateau and cannot grow.
In either case, whether it is SURVIVE, DIE or GROW these businesses need new blood, fresh thinking, temporary or permanent management in the form of business consulting or restructuring.
We have had situations where we even recommended the hiring of a Psychologist to interact with existing family members and to vet new hires as to their compatibility with the existing family group, including but not limited to personality inventory, experience, IQ, negotiating skills et al.
The biggest single issue is usually the death of the Founder/Husband/Father leaving the business in disarray due largely to the lack of planning and a Post Death Will making definitive appointments of the family members, who heads the company, the decision makers the company direction, consequently, leaving the company in shambles.
This reminds me of an existing prospect, who I just visited and the husband died leaving his wife in-charge; however, his two kids thought they should be in-charge and their Mother literally move to Florida.
While that sounds like a loving family on the surface the fact is the two kids want to change the direction of the business and the Mother does not and the suggested move to Florida is intentional so the kids can do their own thing.
This will not happen since the Mother is on all the guarantee paper and would lose everything if the business fails. Our recommendation was for us to actually be involved in all aspects of the business with a permanent business manager so the son can practice his skill, which is working on motors and the daughter her skill, which is office work and the Mother can remove herself from their daily family arguments, which have been counter-productive and actually destroying the company’s core business.
We even have a certified Succession specialist on our synergy staff, who is trained Solution Driven expert in such matters; along with an attorney, who can handle the many legal issues that arise when the family does not agree on a specific plan, sometimes this includes one family member buying-out the other(s) or just selling the company, which we have recommended when there is just unrepairable dissention.
My advice to any family member, who identifies with the above is to call us or any professional experienced in such matters for immediate consultation before it is too late and the business “self-destructs!”