Why should a Family Business think about converting into a Professionally Operated Company?
Allen Nazeri DDS FICOI MICOI
One of the reasons that a family business turn itself into a professionally operated company is to increase the odd of its survival. The latest research conducted by the FBI (Family Business Institute), shows that less than one-third of family businesses are passed on to the next generation and out of those numbers less than 1% make it to subsequent generations.
If you have a successful family business, you may want to consider a consultant that can help you transition your family business into a professionally run company. I have listed some of the challenges that could face if you continue to operate as a family business.
1- Complacent. Family businesses typically become complacent as the owners resist change. I am usually asked, ‘I have built a successful business, why should I change what is working for me?”. When owners are resistant to change, lets say, adopt new technology or learning new ways to become more efficient in operation, this can be dangerous for the company in the market place. As a professionally operated company, the board of directors who are typically outside investors or other successful entrepreneurs, motivate and inspire the family businesses to continually grow and move the company forward ahead of competition.
2- Turmoil in Succession. When a disaster hits, such as the loss of the founder or a disabling disease, since the owner has always been the main person running the business, the rest of the family typically don’t know how to deal with this situation. By the time that other family members figure out what to do, or assign someone to be in charge to make routine decisions, the family business typically suffers loss. This can be in the form of finances or loss of other valuable team members. As a professionally operated company, it is required that you have a written succession plan in place and you would have a team of professionals that can operate the business should there be a disaster.