At Silver+Goren, we often take a closer look at why so many new businesses fail. A recent Globe and Mail article zeroes in on a smaller category – here’s their list of 10 reasons family businesses fail:
- Poor succession planning. Without an appropriate plan and road maps, failure is inevitable.
- Lack of trusted advisors. Advisors often only have technical skills without developing a more sophisticated level of understanding.
- Family conflict. That’s an obvious one – no proper procedures to manage family feuds.
- Different visions between generations. Generational conflict can hinder growth.
- Governance challenges. Family and shareholder governance infrastructure is essential.
- Exclusion of family members outside the business. Every family member, active or not, has an investment in the business.
- Unprepared next generation leaders. The new generation can’t be parachuted to a top position at the last minute.
- Poor business strategic planning. Good planning motivates and keeps the family in business through challenging times.
- Not using their family’s advantage. Failure to brand the business to include the unique resources embedded in the family business.
- Fundamental principles of business are not applicable. Having fundamental business training is not enough to cope with the unique dynamics of the family business.
If you want more information, the article gives an in-depth look at each issue.
We’re most interested in the number one reason: poor succession planning.
As small business accountants in the Greater Toronto Area, we see it over and over again…with sometimes disastrous results.
Over the next few weeks we’ll be looking closely at the who, what, why, and when of successful succession planning. (Hint: the when is RIGHT NOW!) We will give you our insight based on years of experience, and tips your can use to make sure your small business plan is on the right track.