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.
Most business owners have more than one advisor which may include a trusted accountant, an attorney, a financial advisor, and possibly other business owner colleagues. Each has specific knowledge and experience to contribute, but no single individual can possess the professional designations, practical knowledge, or industry related experience to serve as the sole advisor.
There are many symptoms and problems that your family business could be facing. An experienced advisory board can help relieve tensions and resolve problems like these:
1. Continuing disagreements between family members
2. Broken communication between generations
3. Lack of family meetings
4. Narrow way of viewing things
5. Emotionally charged decision making
6. Problems attacked without objective perspectives
7. Distorted assessments of each other’s talents
8. Loss of commitment to the family and/or business
9. Questioned motives
How would an advisory board aid in resolving these problems? Watch for Part 2 of the Family Business – The Advisory Board Post, when I answer questions like: Who should sit on my board? Should I pay them? If so how much? How often should we meet?
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As I read your post, all I could think about was the problems the Rooneys had with ownership of the Pittsburgh Steelers. Too bad your post wasn't in time to spread a little advice their way.
Posted by: Lee Lewis | April 07, 2009 at 09:24 PM
A couple of thoughts for your future posts. You do a good job pointing out ways an Advisory Board can help navigate problems/challenges that are inherent in family businesses. I'd like to hear your thoughts on how boards help companies expand into opportunities. I'd also be interested in whether you think boards are worth the investment for privately owned, non-family businesses. Thanks for sharing your views. Keep it up.
Posted by: Luke Kempski | April 09, 2009 at 05:55 PM