If you have founded or share ownership of a family business, you may instinctively feel that critical decisions about the future of that business—like succession planning, strategic planning, and company valuation—belong in the family. After all, family members may depend on the family company for income and are personally invested in its success. Sometimes, however, family members are too close to the family company to see or resolve important issues. To give your closely held small business the best chance of success and keep it in family hands for the second generation (and beyond), you need to better balance your corporate leadership. You need perspectives from within, and from outside, your family circle. Our Business Transition team experts recommend forming a strong family council and a robust board of directors to ensure you make the best, and most balanced, choices about your company’s future.
Turn to your family council for:
Your family council may include all family members with an interest in the family business or a select group charged with representing everyone. While a family council may be formal or informal in nature, your board of directors will have a formal governance structure. Your board of directors will almost certainly include family members as well, but its members should be drawn from outside the family and include experienced professionals willing and able to offer unbiased, forward-thinking advice on critical issues facing your family company.
So now that you have convened a family council and built your board of directors, what are their respective roles? How can each entity help your family business be one of the 30% that successfully transition into future generations when its founders step down?
Turn to your family council first for:
- Creating open channels of communication between family members, allowing difficult or emotionally charged issues like family business succession and business valuation to be resolved effectively
- Resolving conflicts between family members, often with the assistance of a Family Charter
- Defining the company values and determining how those values are expressed in both business decisions and philanthropic endeavors
- Selecting family members to take on leadership roles and shoulder new responsibilities such as strategic planning and business succession management
- Providing ongoing mentorship opportunities and support
- Celebrating accomplishments and documenting and preserving the history of the family business
- Stewarding the strategic planning process and succession management
Turn to your board of directors first for:
- Unbiased, company-first business and financial advice on important issues facing your family business, especially during times of transition or duress when family members may struggle to see situations clearly or act decisively
- An outside professional perspective on complex considerations such as business valuation, corporate structure and organization, business financing for retirement planning, and more
- Identifying and evaluating opportunities for smart, sustainable growth
- Choosing and promoting capable leaders from outside the family circle
- Protection and preservation of the company wealth through tax mitigation strategies
- To provide expertise in highly specialized areas of business development or business financing that family members may not have
It goes without saying that the family council and the board of directors work best when they work together, in harmony of purpose, to promote the best interests of your family business. At Nicolosi Galluzo, we assist our small or closely-held business clients in developing balanced leadership and building a strong foundation for the future.
If you or your company need advice on balancing your business leadership, it’s time to sit down with a personal advisor from our skilled Business Transition team.