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Family business management: It's all within the family!
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Success
Failure
Businesses in India are predominately run by families and are passed on from generation to generation. In fact, even today 90% of the businesses in India are family-owned.
Family-owned businesses are quite unique. They are commercial organizations that are operated and managed by multiple generations of a family that are related by blood or marriage. These typically go through three main stages of business evolution – the founder stage, sibling partnership stage and the extended family association (Family Dynasty) stage.
Although, these three stages are very different from each other, they usually represent the evolution of a family business. And as the family business evolves, the succession plans must evolve, and the business must redevelop and customize itself to fit the new conditions and culture.
However, there has been a change witnessed in the way family-run businesses are managed, governed and transitioned. Organizations are now realizing the value of right governance, talent, and delegation.
Today, we look at some of the key challenges faced by family-owned businesses in India and how succession planning can help you address these issues.
What are the key challenges faced by family-owned businesses in India?
According to several statistics, most family businesses do not make it past the 3rd generation. Even after having many competitive advantages like a family name, trust between family members, and long-term business direction, these businesses still end up failing.
Below mentioned are some of the major issues that lead to the breakdown of family-owned businesses:
How to build a successful succession plan to overcome the challenges?
The problems that businesses usually face are different at different stages and require a unique approach to solve it. A successful succession of the business can be of great help here. This is because a well-thought succession plan covers all potential challenges that a business can face. However, succession planning for family businesses is more complex than other businesses and must cover several aspects for effective growth.
Here's how one should go about it:
Step 1: Establishment of the goals and guiding principles
Step 2: Establishment of an organizational structure
Step 3: Establishment of a decision-making process
Step 4: Establishment of a Succession Plan
Step 5: Establishment of an estate plan
Step 6: Creation of a Transition Plan
Get in touch with a relationship manager to know more about family business management and to avail advisory services for your business.
To conclude: Family businesses typically go through several stages of business evolution, and not all of them survive the transition. But if you have a well-planned succession, you can be sure of continued success for your family business.
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