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When To Seek Help For Your Family Business

By May 16, 2016July 12th, 2023Finance & Wealth Management, Succession Planning3 min read

No family business is an island. Every family firm requires outside assistance from time to time, even if it is nothing more than help preparing a tax return or selecting a site for a new plant. When it comes requesting support in making decisions central to the business’s direction, business leaders may be more reluctant to look outside. After all, isn’t having the family in control the point of being a family business to begin with?

From time to time, however, it is in the interest of many family enterprises to entertain the idea of seeking help with decisions that might ordinarily be considered the exclusive preserve of family leaders. The fact that a family has the right and the power to make a critical judgment call does not mean the family always has the information, experience and skills necessary to make it correctly.

No matter how long a leadership group has been in the saddle, or now tightly they hold onto the reins, the reality of family business makes it difficult for insiders to resolve feuds between family members. Few family leaders can resist taking sides and, in effect, becoming part of the feud. For long-lived, intractable feuds, an outside advisor or counselor is a valuable addition.

The same goes for deep-seated, widely divergent differences about business strategy. When one group of shareholders wants, say, to seek a buyer for the company, and another group wants to maintain ownership, the gap may be too wide for existing management to bridge. Retaining an objective outside consultant to evaluate potential buyout offers and rigorously compare them to keeping it in the family can go a long way toward illuminating vital questions and resolving differences.

Decisions about succession are the kind most commonly brought to family business advisors. These decisions activate some of the most sensitive nerves in family business structures. Existing leaders, perhaps including founders, have to confront their own mortality — not an easy or welcome task for any human. Next-generation leadership prospects have to accept critical evaluations and be prepared to be found wanting. And their various fans and backers have to make the same preparations.

While these are difficult jobs, they can be learned. The problem is that succession doesn’t come along much more often than once a generation. Many family business leaders have to deal with it just once or twice in their whole careers, when they are ascending to the top jobs and when they are letting go. So no matter how wise and skillful the leaders are at running their business, this is usually not something they have much experience with. Such a critical decision can greatly benefit from the participation of a professional advisor who has been part of it many times before.

Ideally, of course, advisors are involved before these problems become critical. Succession, in particular, benefits enormously when performed as part of a long-term strategic plan. Young leaders-to-be may need years to prepare for their tasks. The retiring generation may also require a period of adjustment. An outside advisor is familiar with the preparations and can help the family be ready when the time comes.

Just as family firms turn to outside specialists for tasks as varied as recruitment and facility design, they can and should consider seeking help when the stakes are high for decisions that don’t come along frequently, and when emotions may run deep.

Here are ten more signs to look for to see if you would benefit from an outside consultant