Starting a family business is a challenging endeavor, especially when routine work threatens to divert attention from long-term objectives. You want your business to last, and we realize that.
The traditional view on succession issues is unequivocal: finding, training, and putting in place the next CEO is of paramount importance. That may sound obvious, yet many people overlook the need to include non-family executives and consultants. Consider discussing your options with a CPA in Princeton, NJ.
According to the most widely cited study on this phenomenon, only 30 percent of family businesses make it to the third generation. The need for succession planning in the face of this bleak statistic spurred the development of the field of family businesses.
Family business specialists, however, now recognize that a “survival” rate of only 30% is, in fact, a tremendous success, thanks to the benefits that come with operating with family power.
Unfortunately, we can no longer use “passing the baton” as a metaphor because it is so insufficient. We now know that in most cases of succession, there is neither an outgoing nor an incoming leader. There is instead participation from all relevant parties, including as members of the family, company executives, and trusted advisors.
The process of leadership transition involves more than just finding a new leader and getting the current one ready to step down; it’s a heady mix of social, cultural, financial, legal, strategic, moral, and other factors that defy reduction to a purely “businesslike” perspective.
It dawned on us that the key to success is striking a balance between businesslike and family-oriented perspectives. Obviously, the word “succession” fails to adequately convey what is happening. Strategic, estate, operational, and governance planning are all aspects of a firm that are often overlooked in family-run enterprises, in addition to succession.
A catastrophic outcome can result from carelessness in any of these areas. The question was often not “how to,” but “why not?” What could possibly stand in the way of a family business accomplishing everything it needs to in order to stay in business?
The endeavor to address the estate-tax issue, as well as the necessity to build processes to account for the vast complexity of changes in personal, family, and company finances, is of paramount importance. Issues of strategy and structure in the company, family values in relationships and structure, governance and responsibility, and the individual trajectories of the key individuals are all included.