Making the decision to start reaching out to family business advisors can be the difference between your business surviving the generations, or a story of “back in the day”.
Running a family or privately owned businesses can be just as challenging as it is rewarding. In order to be successful, it’s necessary to strike a delicate balance between family dynamics and business decisions. But, navigating these complex dynamics, balancing family relationships, and making critical business decisions isn’t as simple when family is involved. This leads many family businesses to decide to have a family business consultant guide them, in order to help the business navigate issues that arise when family dynamics clash with what’s in the business’ best interest. Unfortunately, many families wait until it’s too late.
Why? Well, making such an investment is not always easy, especially if the family business is struggling financially — creating quite the conundrum. But, if you knew how much this support could not only save your business, but lead to positive growth and change for generations to come, it might just be worth it.
Let’s explore the essential role of family business advisors and how they empower family businesses for long-term success.
In this guide we’ll cover:
- The 5 Main Challenges of Running a Family Business
- What Do Family Business Advisors Do?
- The Benefits of Bringing on a Family Business Consultant
- What To Expect When Hiring a Family Business Advisor
- The Cost of Family Business Advisory Services
- How To Know It’s Time to Bring on a Family Business Advisor?: A Checklist
The 5 Main Challenges of Running a Family Business
You may be surprised to know that so many household names are actually family run businesses or privately owned. From Wal-Mart and Ford to Gap, Estee Lauder, Barnes & Noble, etc. These are just a few that come to mind. Yet, despite how big these businesses are now, if you were to dive in and learn their stories, you’ll find that most of them took a long time to get to where they are now.
Why? Well, running a business is hard enough on its own. But, add family into the mix, and things just got a whole lot more complicated. Chances are, you don’t need us to tell you that, either.
That’s because as great as it is to be in a family business, doing so comes with its own unique set of challenges that can often push the important business matters to the wayside, resulting in a major loss that can hit a lot harder than what you see on the surface.
But, let’s back up a bit.
Here are several key areas where family businesses often face difficulties:
Challenge #1: Managing the Money
Managing finances in a family business can be complex. Family businesses often have intertwined personal and business finances, making it challenging to separate the two. This can lead to issues such as improper cash flow management, unclear financial reporting, and difficulties in making strategic financial decisions. Family business consultants assist in establishing robust financial systems, improving cash flow management, implementing sound financial practices, and providing guidance on investment strategies, tax planning, and estate planning.
Challenge #2: Balancing Family Dynamics and Business Objectives
Family dynamics can significantly impact the operations and decision-making processes of a family business. Balancing the needs, interests, and expectations of family members while also focusing on the business’s objectives can be a delicate task. Conflicts may arise due to differences in opinions, power struggles, or challenges in maintaining a healthy work-life balance.
Family business advisors provide guidance and facilitate open and constructive communication among family members. They help establish clear roles and responsibilities, define decision-making processes, implement effective conflict resolution strategies, and create structures that separate family matters from business operations.
Challenge #3: Applying Professional Business Governance
Family businesses often face the challenge of establishing and maintaining effective governance structures. They may lack clear policies, procedures, and systems, leading to inefficiencies, conflicts, and difficulty attracting external investors. Family business consultants assist in implementing proper governance practices, creating transparent decision-making processes, and professionalizing the business through the introduction of management best practices, corporate governance frameworks, and performance evaluation systems.
Challenge #4: Planning for the Future
Developing and executing long-term strategic plans can be challenging for family businesses. They may struggle with adapting to changing market dynamics, embracing innovation, or expanding into new markets. Family business advisors bring expertise in strategic planning and growth. They help businesses identify new opportunities, develop actionable plans, implement effective growth strategies, and provide valuable insights to navigate the ever-evolving business landscape.
Challenge #5: Deciding Who Should Take Over
Planning for the future and ensuring a smooth transition of leadership is crucial for the long-term success of a family business. However, succession planning can be an emotionally charged process. Addressing concerns related to control and ownership can pose significant challenges and unleash a lot of feelings that can impact the business.
It’s no wonder that addressing these challenges requires a proactive approach and specialized expertise; most importantly, an outside third party that’s not emotionally invested. By recognizing the need for assistance and engaging the services of a family business consultant, businesses can navigate these complexities, overcome challenges, and position themselves for sustainable growth and prosperity.
For example, here at NYC Advisors, we worked with two cousins who were looking to buy out the family business from their parents. As their chosen business advisor, we created a business plan, negotiated a new credit line and guided the new owners as the company became profitable in its first year after the acquisition.
What Do Family Business Advisors Do?
Family business advisors are seasoned professionals who specialize in guiding and supporting family-owned enterprises. They bring a unique blend of business knowledge, industry expertise, and the understanding of family dynamics to the table. Some may have been involved in their own family business at some point in their career, too.
So, how can a family business consultant actually help you navigate those challenges mentioned above? Well, it will be different for each business depending on their own challenges and needs. But, here are jut some of the ways:
They provide objective business analysis.
Family business advisors bring an external perspective and analytical expertise to assess the business’s performance objectively. They conduct thorough business assessments, including — but, not limited to — analysis, market research, and benchmarking against industry peers. Advisors identify areas for improvement, recommend strategies for growth, and assist in implementing necessary changes. And, they’ll do that at different stages.
They help navigate family dynamics.
One of the primary roles of family business advisors is to help manage the often overwhelming interactions between family members. No, they aren’t therapists. But, in the context of business relations that may overlap into — or stem from — complex family relationships, they’re able to offer impartial advice and mediation, fostering effective communication, and resolve conflicts that may arise from issues that the advisor can help unravel.
They implement a sustainable business structure.
Family business advisors understand the importance of establishing a strong foundation for now and in the future. They assist in developing robust financial systems, implementing effective governance structures, and streamlining operational processes. By ensuring efficient management practices, they create a framework — and, one that works for your business — that supports long-term success.
Family business advisors assist in establishing sound corporate governance practices within the business. They facilitate discussions among family members and stakeholders, identifying goals, opportunities, and potential challenges. With this information, they can begin the strategic planning process, assisting in charting a clear direction for the business and aligning it with the family’s vision. During this process, they help define roles and responsibilities, create governance structures, and develop policies and procedures that promote transparency, accountability, and fairness. By implementing a solid business structure, advisors enhance decision-making processes and mitigate potential conflict, which is likely to happen less often once governance is established.
They assist in financial planning.
Family businesses often have unconventional financial structures and significant assets. Advisors work with families to manage their wealth effectively, including investment strategies, tax planning, and estate planning. They ensure that the family’s financial resources are protected, optimized, and aligned with both short-term and long-term objectives.
They coach the next generation.
Even if you’re not quite there yet, succession planning is an inevitable conversation for the continuity of family businesses. When the time comes (and, it never hurts to plan ahead), advisors work closely with the next generation, helping them develop the necessary skills and competencies to lead the business forward. They provide mentorship, guidance, and facilitate a smooth transition from one generation to the next.
They suggest opportunities for professional development.
Advisors recognize the importance of continuous learning and development for family business members. They provide information on educational resources, workshops, and training programs tailored to the specific needs of the family and the business. They can also make suggestions about who in the family may benefit from certain educational workshops more so than others.
The Benefits of Bringing on a Family Business Advisor
Family business consultants are there to help you navigate the challenges you’re facing and anticipate the ones that you don’t see coming. Working with a professional can yield numerous benefits for your enterprise.
Here are some advantages that can help your family business thrive:
- Expert guidance: Family business advisors bring a wealth of experience and knowledge, gained from working with various family businesses and privately-owned businesses across industries. Their expertise enables them to offer tailored solutions and strategies to address the specific needs of your business.
- Objective advice: Being external professionals, family business consultants provide an unbiased perspective. They offer objective insights and advice, free from emotional biases or personal agendas. This impartiality helps make informed decisions and avoid potential pitfalls.
- Enhanced financial performance: Advisors help optimize financial management, control costs, and implement effective financial reporting systems. By identifying growth opportunities, minimizing risks, and maximizing profitability, they contribute to the long-term financial success of your business.
- Improved communication and conflict resolution: Family business advisors foster open and transparent communication channels. They facilitate healthy discussions, improve collaboration, and help family members address conflicts constructively, preserving family harmony while driving business growth.
What To Expect When Hiring a Family Business Advisor
When engaging a family business advisor, it is essential to understand the process to set realistic expectations. Though the process will vary from one advisor to another — as well as depending on the needs of your business — here is a general outline of how the engagement typically unfolds:
Step 1: Initial Consultation
To start, the process of family advising begins with an initial consultation where the advisor gains an understanding of your family business, its unique challenges, and where you hope to be. This meeting also provides an opportunity for you to assess the advisor’s expertise and compatibility, and they’ll be doing the same. NYC Advisors offers a free one-hour initial consultation where we can get to know each other, you can understand how we can help you, and ultimately, make sure we are a right fit.
Step 2: Assessment and Planning
Next, the advisor conducts a comprehensive assessment of your business, analyzing its strengths, weaknesses, opportunities, and threats alongside what they’ve learned in the initial consultation. They may also look at what other family businesses are doing in your industry to get an idea of what the trajectory should be. Based on this evaluation, they develop a tailored plan outlining the strategies and actions required to achieve your desired outcomes.
Step 3: Implementation
Once the plan is approved, the advisor works closely with your family to execute the agreed-upon strategies. Family business advisors provide ongoing support, guidance, and expertise during the implementation phase, ensuring smooth execution and addressing any obstacles that may arise. They’ll also set benchmarks and/or deadlines to create and manage healthy expectations going forward, ensuring everyone is on the same page.
Step 4: Monitoring and Evaluation
Last but not least, family business advisors continually monitor the progress of the implemented strategies, evaluating their effectiveness and making adjustments as needed. Implementing regular check-ins and performance assessments help track the business’s growth and provide insights for further improvements. And, if needed, they may call in — or, connect your family with — other professionals that are equipped to handle very specific aspects of the business.
The Cost of Family Business Advisory Services
The cost of engaging a family business advisor can vary based on several factors. This includes the scope of services, the ins and outs of the business, and the advisor’s experience and reputation. Typically, family business advisors charge either an hourly rate or a fixed fee for their services. It is essential to discuss the fee structure and expectations upfront to ensure transparency and avoid any surprises.
How to Know It’s Time to Hire a Family Business Advisor?: A Checklist
There’s no denying the importance of what family business advisors and recognizing all the ways they can help your business. Whether your business is just starting or has been around for generations, in a good place financially or not in a good place, there’s never a wrong time to bring on a professional family business consultant.
That being said, if you answer yes to any of the following questions, it may be a good idea to start interviewing family business advisors sooner than later:
- Are conflicts within the family affecting our business decisions and hindering our progress? Do family disagreements often result in gridlock or stalled decision-making processes?
- Are conflicts impacting the overall harmony within the family and affecting business relationships?
- Do we need an objective third party to mediate and facilitate constructive communication?
- Are we prepared for leadership transitions and succession planning? Have we developed a clear plan for transitioning leadership from one generation to the next?
- Are we confident in the next generation’s preparedness and abilities to lead the business?
- Do we have a framework in place to ensure a smooth transition without disrupting business operations?
- Are we operating with professional management practices and solid governance structures?
- Have we implemented professional management practices to optimize our business operations?
- Do we have well-defined roles, responsibilities, and policies in place to guide our decision-making processes?
- Are we equipped with the necessary systems for performance measurement, accountability, and strategic planning?
- Are we effectively balancing tradition and innovation within our business?
- Are we struggling to adapt to changing market trends and customer preferences?
- Do we find it challenging to introduce innovative ideas while preserving our family’s traditions?
- Could we benefit from external expertise to help us navigate the balance between tradition and innovation?
By honestly assessing these questions, you can gain valuable insights into your pain points. This can help you determine whether hiring a family business advisor is the right step towards addressing them.
Don’t Wait Until It’s Too Late!
Navigating all the obstacles of family business requires a delicate balance of business expertise and an understanding of family dynamics. Family business advisors bring invaluable insights and guidance to help you overcome challenges, foster growth, and create a legacy for future generations. By collaborating with a seasoned advisor, you gain access to expert knowledge, objective advice, and develop a roadmap for success.
At NYC Advisors, we have experience working with family businesses and privately-owned companies for more than 20 years. The businesses we’ve worked with operate in all different industries, with a range of years in operation, company size, and most importantly, their unique reasons for needing a family business consultant.
See how we can help you today, by booking our free consultation. Let’s talk!