Running a small business has its challenges, but the challenges of owning a family-owned business extend further. At Generational Equity, we understand this as we are a privately held business ourselves.
The family owned business oftentimes has a “romantic” appeal to it. However, when the smoke and lights fade, there are certain challenges that family-owned businesses must prepare for. There are risks that the family owner is prone to that a small business without the family entanglements is not.
According to a Pepperdine University article, some of the risks include:
“succession planning, marriages and divorces, complicated relationships as well as routine issues that emerge around turf battles, shareholder control, compensation structures, and processes for strategic decision-making.”
The same article contains outstanding content regarding ways to plan for challenges that are faced by family owned business owners. The pitfalls the article discusses include:
- Failing to Document the Terms of the Agreement in Writing
- Ignoring Fiduciary Responsibilities in the Event of a Dispute
- Failing to Plan for the Future – This includes aspects of planning as well as contingency plans in the event of divorce.
For the family-owned business owner, it may be time to take a look at some of the foundational items of your business structure and documentation. Not only will this set your business up for greater success, but when you are preparing to sell your business in the future it will allow you to do so standing on a stronger piece of property.
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