Entering A Family Business

Question 1

What is a family business?

Answer 1

A family business is a business that is influenced by family ties in order to achieve a vision of the family over, potentially, several generations.

Question 2

Significance of family business in the economy?

Answer 2

1. Stability in a wider economy
2. Highly visible in agriculture, service sectors and knowledge.

Question 3

Discuss family system and business system.

Answer 3

Family system - is where descions are mainly made based on the emotional bond within the family and are not always based on reason.
Business system - where relationships determine the results and where the descions must be made. Business system focuses on survival and growth.

Question 4

Reasons for problem in family business.

Answer 4

1. No capital for growth
2. Older members don’t want to let go of ownership.
3. Poor estate planning
4. Sibling rivalry because of succession.

Question 5

What is succession?

Answer 5

Is the process in which the leadership of the business is transfered from the existing leader to a subsequent family member or non family member.

Question 6

Barriers of succession?

Answer 6

1. Inability to choose a successor.
2. The leader selects a successor to be a slave.
3. A denial of mortality.
4. A founder refuses to transfer leadership.

Question 7

Discuss the types of leaderships styles.

Answer 7

1. Monarch - Do not leave the office unless forced through death or revolt.
2. Generals - Forced to leave the office but they plot their return.
3. Ambassador - They leave gracefully and frequently serve as post retirement mentors.
4. Governor - Rule for a limited term, and then they retire. They switch to other vocational outlets.

Question 8

What are the succession options?

Answer 8

1. Appoint a family member.
2. Appoint a caretaker manager.
3. Appoint a professional manager
4. Liquidate the business.
5. Sell it as a whole or in parts.
6. Do nothing.

Question 9

What are the five critical steps of succession?

Answer 9

1. Determine what the owners and the family of the business want to happen now and in the future.
2. Evaluate and test succession goals for feasibility and compatibility.
3. Develop a primary succession plan.
4. Communicate, modify and improve the plan.
5. Implement the plan

Question 10

What is an advisory board?

Answer 10

Is the group of respected and experienced individuals that are put together by the family business in order to compensate for the short comings of the board of directors.

Question 11

Roles of the advisory board.

Answer 11

1. Primary role is to provide advice
2. Ensure that descions are in line with the family value system.
3. Manage conflict timeously
4. Ensure that descions are based on reason instead of emotion.

Question 12

Roles of family counsils.

Answer 12

Oversee family matters such as the family’s philosophy, employment criteria and succession planning.