Jan 2012

Managing the challenges of family businesses

As a skilled middle class emerged in market after market, generational ownership of workshops, sales stalls and other enterprises was common, eventually encompassing farmland as well.

Before there were stock markets or investment banks, before quarterly reports or external audits, these businesses formed the bedrock of advancing economies. Most catered to a small market of customers within maybe a day’s journey. 

This report will look at the place held by family owned companies in modern economies, paying particular attention to their advantages and disadvantages. Next, it will consider four areas vital to the success of family-owned businesses – communicating clearly within the family, balancing business strategy with family expectations, creating appropriate governance and organisational structures and planning leadership succession. It will conclude by underscoring the pivotal role finance professionals can play in building and sustaining successful family businesses.

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Family firms may be willing to wait longer than most other investors for a return from capital invested – so called ‘patient capital.’ It has also been argued that family businesses are more prepared than other firms to continue investing during cyclical downturns, giving them an advantage over other quoted and private equity owned firms where investment tends to follow cash flow more closely

The Institute for Family Business

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