Statistics tell us only 33% of family businesses transfer to the second generation and only 15% make it to third. Why is it so difficult for a family to pass on the business to the next generation? What causes them to fail? What steps can be taken in order to increase the likelihood of the business succession? I am convinced one of the most important factors in the success of family businesses is the assistance of an advisory board. This is a follow up to my earlier post on Advisory Boards. Click this link to read part 1.
A team effort, using both reasoning and an intuitive approach, is most successful for problem solving and business development. The same notion of a variety of advisors in the form of an advisory board is what expands the business owner's understanding of their business opportunities as well as obstacles. This variety of advisors can be made up of peers and members of other family business owners who understand the sometimes complicated and unique problems a family business encounters. It is very important, therefore, what criteria is used to make these selections to the advisory board.
This understanding supports the formation of a strategic plan that addresses all of the financial, personal, and business issues. Consequently, the advisory board is a powerful and critical vehicle through which the business owner gains the benefits of the combined thinking of the group, resulting in comprehensive solutions based on the invaluable resources and wisdom of the group.
But, a family business doesn't have to be experiencing problems to benefit from a Board of Advisors. There are lots of opportunities that an advisory board can help the business capitalize upon:
1. To bring additional depth and breadth to planning for the future.
2. To provide specific assistance in assuring the continued success of company operations.
3. To aid in the selection and development of the next generation of owners and leaders.
4. To help expand and diversify the business.
5. To counsel regarding succession and retirement plans.
6. To have an objective assessment of actual performance of family members and key non-family personnel.
Establishing an advisory board is one of the smartest moves a family business owner can make. The advisory board can act as a safety net for the family and the business. If you would like answers to questions such as: Should I compensate my board? How often should we meet? You can contact me for an Advisory Board Guideline.
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