Why Family Business Success Planning is Important?

Introduction

• Does your family-owned business falling?
• How to make a Family Run Business successful?

Hundreds of big family-run businesses collapsed over the last few decades in India due to a lack of efficient family business succession planning.

In the view of problems faced by family-run business owners, the following 5 steps will help you to make proper family business succession planning process in the long term. 

Step #1: Long Term Leadership and Strategy

It is the first step of family business succession planning. 

The family-owned business that lacks long term leadership and strategy doesn’t go a long way. Success and longevity of a business depend on the long term vision and mission for executing strategies. 

A family run business often has old-fashioned leadership, which is incapable of formulating innovative execution strategies, involving new capital and people for a longer period.

With paternalistic control over its day-to-day affairs, such businesses are incapable of recruiting external people. 

Such a conservative style of doing business may work for a short period but fails in the long run. 

A leader in the family-run business must be capable of making an action plan for a longer period to maintain its credibility in the market. 

Step #2: Succession Planning

Pathetic family business succession planning has long been the prime reason behind their failure since centuries in India. 

The absence of systematic succession planning of business often triggers conflict among family members on the exit of an incumbent. 

According to the PwC report, “Only 15% of family-owned businesses have a robust succession plan.”

Family elders who are heading the business need to bestow trust in the new generation by inducting them in business as their successor, which will avoid any future friction for leadership. 

For a successful business, there should be clarity on the role and goal of each family member.  

Step #3: Wealth Management

It is the third step of the family business succession planning process.

Improper management of wealth among family members, most of the time, results in conflict between family members at times of crisis, which affects the business adversely. 

Several big family-run businesses in India have disappeared from the market, over the years, due to family contention over wealth management.

There should be clarity on equity of each and every member of the family to avoid any future conflict that can affect the business. 

An incumbent leader must make “long term vision for wealth management that makes the business run smoothly for a longer period” and disperses any potential grudge. 

Step #4: Managing Family Relationship

If you are unable to manage family relations properly, then the business won’t run smoothly for a longer duration.

Contentious family relations naturally hinder business operations leading to its extermination in the long run.  

Family heads are required to build trust and communication with family members while implementing long term vision, which also imbibes faith among your employees and creates a healthy environment among stakeholders. 

Step #5: Professionalization

Undoubtedly, most of the family-run businesses in India lack the professionalism that hinders their growth in the long run. Until and unless you make your family business professional, outsiders will hesitate to work with you. 

In typical family run business, decision making power lies in one hand, which makes employees think it as a family mafia, where only family members will grow. They lose trust in your business and leave your organization as soon as they find another. 

As such it is imperative to make your organization professionally sound as per the needs of the market, where competent manpower finds an appropriate environment to grow their abilities. 

Moreover, you must train family members as professionals to dilute the difference between family manpower and non-family power.

Implement the abovementioned steps of family business succession planning to make your business successful.