Having advised successful family businesses for over twenty years, these are the 5 things that I can assure you will make a difference to your family legacy, wealth and harmony both now and for future generations. Consider how you can apply them in 2014. David Harland – Family Business Advisor
We hope that 2013 was a happy and prosperous one for you and your family. Now that last year is behind us, let’s
take a look at some practices that you can implement in your family business that will help prepare you for the future and hopefully make 2014 the best year yet.
1. Know What Your Business Is Worth
Do you know, right this moment, what your business is worth? If not, a business valuation exercise may be in order. Recent trends in the sale of family businesses show that many firms leave significant money on the table because they’re not able to demonstrate value to the buyer.
A hard truth is that many business owners tend to have an unrealistic view of what their business is worth because they haven’t done the work of formally evaluating the business or getting independent advice. Getting a business ready for sale means evaluating all aspects of profit drivers, growth paths, and finding and fixing business shortcomings.
Even if you’re not looking to sell your business, understanding its market value can help you make better decisions about the future of your firm and answer the all-important question: Am I creating value today or destroying it?
2. Engage the Next Generation
The role of the next generation is fundamental to the long-term success of a family business. A firm’s ability to engage their younger family members and guide their development into future family business leaders is a hallmark of a successful multigenerational family firm.
Depending on the age and level of interest of your younger family members, there are a number of ways to begin introducing them to the business. Family members who show early interest can participate in dinner conversations about the business or take summer jobs. Those who are already working in the business should be included in strategy sessions and meetings with important stakeholders.
Our experience shows that open communication is key to engaging the next generation. We recommend creating opportunities for contact with the business, but allowing each family member to make their own decisions about how much involvement they want.
3. Be Active In Your Local Community
Many successful family businesses are active in their communities and involved in philanthropy. Philanthropy can serve as a touchstone for the family business and help ensure that future generations support and share the family legacy. Many entrepreneurs have the ambition to create wealth for their descendants and want future generations to benefit from their hard work. For them, philanthropy is a natural expression of their personal values and a way to create a family legacy of “giving back to the community.”
Philanthropy can also be a wonderful way to build and strengthen bonds between and among generations of family members. By turning philanthropy into a family project, you can help your children understand the value of money and accustom them to sharing their resources. It can also create valuable opportunities to discuss family values and shared interests.
4. Market Yourself As a Family Business.
Research shows that consumers trust family businesses over their corporate competitors because of the perception that family businesses build community bonds, foster social stewardship, and reward customer loyalty. This trust is an important source of competitive advantage to family firms and it’s wise to build on that by marketing yourself as a family business. Being a family firm can also open doors to partnerships with other family-owned businesses in new markets and create growth opportunities around the world.
We strongly encourage our clients to prominently identify their firms as family businesses and take advantage of the many forums and resources available to them. An easy way to begin promoting your identity is to participate in the Family Business Australia emblem program, which is designed to signify to government, community, and customers that your business is a major contributor to the economy and culture of Australia.
5. Enact Family Governance
Developing family governance structures is critical to managing family wealth and preserving a legacy for future generations. Many growing family firms decide to develop governance structures when it becomes necessary to separate the business from the family. Our experience suggests that family firms use formal governance structures to enhance communication between family members, reduce internal conflicts, nurture the next generation of leaders, and develop a shared family vision for the future. An effective family governance structure should be flexible to meet current family needs while positioning the business and family to thrive in the future.
To learn more about how you can impliment this best practice for your business, contact FINH on 07 3229 7333.