Why is Family Business Help "Stuck" in Another Century?

I belong to several LinkedIn groups that focus on family business. 

An interesting question was posed on The Family Business Network: “What are the key differences between owner managers of a family business and Corporate Management business thinking? What are the main stumbling points between making the transition? “

Why is Family Business Help Stuck?

How about re-framing this question to add “entrepreneurial thinking”?  Why is it necessary for FB experts to use the dichotomy of family business vs. corporate? By definition a family business starts out as an entrepreneurial venture. Over time the founders lose that entrepreneurial vision since the perceived risks of growing the business and changing increase with their age.

Could this be that many who consult with Family Businesses are not entrepreneurs? 

Corporate mangers are in place to maintain the status quo… not to be visionary. And keeping a business as a family venture means thinking for 30 years out…

So maybe family businesses are best served by people who can bring in the corporate side of risk reduction and status quo AND people who have vision to carry the business forward for generations to come.

I am sure many may disagree and I come to this perspective from personal experience. 

 
All the best!
Dom Celentano
Tips on Running a Small Business

Family Business Goals - the MOST Important to Consider

Note: Reposted in response to the NY Times Article Making a Plan for Succession.

Consider the question "Are you a family business OR a business family"?

I was attending a seminar recently on Family Business issues and goal setting, resolutions and succession were major topics. The goals discussed were those that would be apparent to others… family member engagement, focusing on the big picture, etc.

Here is the most Important Goal to Consider

The next generation is best served by setting a more important goal that has generational time frame impacts. So the question - Shouldn't a major goal of the next generation be to determine the viability of the business for the next generation? We now have what I call structural ambiguity present in the economy and the business environment. Assumptions that were prudent in planning and forecast in the past probably are now irrelevant.

Are You Assuming Perpetual Business Viability?

The younger generation simply cannot assume business viability for another 20 years, just because the business may have been family owned for several generations past.This is most difficult to do since the Family-Business overlap is so strong and the “family” component is highly emotionally charged.

As the moderators said and as I always say, sometimes the sale of the business is the best decision for the next generation. A business in the Maturity stage of a business’s cycle or in the early stage of declination may not be the best asset for the family.

Consider Becoming a Business Family

A Family Business is construct, a “container” so to speak that provides value in many aspects to the family. However if the family thinks of themselves as a “business family” or what is called an enterprise family, it is not narrowly defining a business sector where it can invest it’s Human, Social and Economic capital.

Do you like to work together? Does your family have a great mix of skill sets? Are you great at articulating a vision and strategy? If yes… then you can apply all of that valuable family capital to new enterprises that will be born now and last for several generations into the future.

For a deeper dive into this subject, you may want to read The Route to Finding the best Family Business Adviser.

Also you can read my response to a NY Times blog post on Succession Planning.

All the best!

Dom Celentano

NJ Family Business

Tips to Investing With Family

As soon as you decide to invest in your child's future business, it begins to resemble a Family Business… and this where the complications begin. If you want to learn more about Family Business visit my Fairleigh Dickinson University Academic Site. Here are some tips and insights on family business.



This type of investment begins to have the overlap of Family, Business and Ownership, and needless to say the "Family" part has the most influence. The Venn diagram here is the illustration of this overlap and is the cornerstone of describing a family business.

You probably want to evaluate your son or daughters business investment request and they should create some form of business plan. You may immediately consider having your accountant look at this family business plan. I would not advise banking solely on your accountant to evaluate the business plan. Use the accountant to perform a critical analysis of the proformas.



However a family business plan is much more than financials.  My viewpoint is this:

• It is the articulation of how an idea is put through a feasibility analysis
• If feasible, then the development of a marketing plan. All business rest on the success of "going to market", hence the critical importance of a marketing plan.
• If you can create a convincing marking plan, and this is another areas where you should have a 3rd party review, an Operating Plan would come next.
• Build Up Sales and Cost Assumptions come next to create your financial financial forecasts.

A better approach to 3rd parties is to include other business professionals along with your accountant. These can be consultants and Small Business Development Centers. A great resource is seeking out a university that has an Entrepreneurship Department. There are many professors and MBA students that can help in the business plan evaluation. For example we have our Business Ventures Program, that works with entrepreneurs to refine their plans for greater success. This is one way to be objective AND create the necessary boundaries between parent and investor.



A wonderful structure is The Family Bank. It allows you to invest in your children and have some structure and boundary separation. You can structure this as formal as your needs determine. It allows the parent to wear two hats:

•  the parent hat
• the investor hat.

It allows you to say "as your parent I want to support you as my child", and then you can flip the hat to say "as your financial backer, here is what the 'bank' needs to make a decision".



The great thing about a Family Bank is it allows the return of capital to the "bank". The Family Bank is what we call patient capital, giving your children the extra breathing room they need to establish the business with feeling entitled the money, just because they are the son or daughter.



The return of principle and interest to the bank allows the parent to reinvest in the future for other children and/or to preserve and hopefully grow the family economic capital. It preserves the financial estate for the next generation.



All the best!

 

Tips on Family Business

Dom Celentano

Visit my Silberman College of Business Academic Site

Family Businesses are different. Why?

Many small businesses are also Family Businesses. Family Businesses are VERY different and it is difficult to explain the differences in a brief and understandable manner. So here is a short narrated slide show that you will find helpful.