Not too long ago, people lamented the incoming decline of the traditional mom-and-pop shop to the seemingly unstoppable expansion of mega businesses. Today, family-owned enterprises are experiencing a bit of a revival in contrast to the sudden decline of their corporate-run counterparts as former employees turn to entrepreneurship to tide over the recession.
The family business, therefore, has renewed its position as a key player in economic recovery, and its continued development plays a key role in securing long-term sustainable growth.
But for the nascent family entrepreneur, it isn’t always smooth sailing. The genuine challenges of running a profitable business aside, the enterprise as run by a family is a lot more complex given its primary involvement of the next of kin. Conflicts can arise when the roles of family and business overlap.
Entrepreneurs who run family enterprises, for instance, may need to decide which between family members and nonfamily employees are best suited for a particular role in the business, which can cause tensions between the two parties. Conflict within the family can also affect the business, which may be difficult to sort out if things go downhill.
Family members must work in concert with one another, and each decision must be made not only with respect to the business but also the individual goals of each family member.
The biggest issue is perhaps that of succession or transition; many businesses still do not survive past the first generation. To address this problem, entrepreneurs running family enterprises must outline a plan surrounding their succession, which includes not only passing the torch of management but also creating value through tax optimization and ironing out inheritance and probate issues in the long run.
Anthony Amaradio heads Select Portfolio Management, which assists family businesses through financial planning, succession planning, and wealth management. Visit this page for more on the company’s services.