A colleague recently sent me a copy of a recent very informative survey report conducted by PwC (PricewaterhouseCoopers), who interviewed over 1,600 family business owners and managers from 35 different countries. Because most of my Exit Planning and M&A clients are owners of family businesses, I was quite interested in the findings. You may be, too.
It may be helpful to look at a family business by thinking of it as three overlapping relationship circles: Family, Business, and Ownership. The area in the very center of the circles creates the most complexity – the place where it is crucial to navigate the waters of decision making with a great deal of wisdom, sensitivity to volatile personal issues, and often the openness to accept outside assistance when needed.
According to PwC, the most healthy and successful family-owned businesses know how to find a balance between these circles. They depend on “professional management, responsible business ownership and a harmonious family dynamic.” This can be difficult at times, of course, but if there are “clear written agreements” about how decisions are made and which family members can be part of the business, many difficulties can be avoided.
Healthy family businesses also have “robust governance procedures” that include the use of outside managers if needed and a willingness to hold family members just as accountable for their performance as non-family members. Good boundaries are established between business issues and family issues. Rules are established about the buying and selling of shares and how to keep the family finances in good shape no matter what is happening to the business.
Finally, and a key element to success, in my opinion, the most stable and profitable family businesses use experienced professional advisors to ensure that business decisions are made wisely and objectively. That way, risks can be minimized, business value can be maximized, and the business can have a long and healthy life, no matter who is at the helm.