Managing a family business is like juggling. The objectives of the company – growth and realizing good profits – do not always run in parallel with the needs and expectations of the family members.

By improving the management of a family business, the operating results can be improved and the expectations of all family members can simultaneously be met. Maintaining this sometimes delicate balance can cause headaches for the management of family businesses:

  • How can we separate family issues and business problems?
  • Do we have an effective structure for decision-making and communication?
  • Are our strategic business objectives in line with the agreed family values and ambitions for the business?
  • How do we appoint and evaluate new members of the management?
  • What should be the proportion of managers and passive shareholders who are family members?
  • What are our plans for the short, medium and long term, and which risks do we face during their realization?

The need to formalize the rules within a family business and the implementation of a governance structure becomes particularly relevant when the founder of the company ceases the day-to-day running of the business and the organization is passed on to the next generation. When a company reaches a size and complexity that is no longer suitable for informal management styles, then the time has come to consider a more effective governance structure.

Family

  • Provide special communication channels (for example, family gatherings or a family council) where important strategic decisions are discussed and which connect and unite the family with the business.
  • Appoint an effective advisory body, which also includes independent non-family members.
  • Draft a family charter. This will not guarantee that conflicts about the business will no longer arise between family members, but it may serve as a means of resolving conflicts. Moreover, it is an incentive for the family to think about important issues that have to do with the future of the family business, which might otherwise be indefinitely postponed.
  • Formulate guidelines and policies so that the family can take decisions about their individual and collective future share in the leadership and ownership of the family business.

The business

  • Develop a clear vision that produces a sound strategic plan.
  • Make sure you understand your business risks and control them.
  • Look for potential problems and irregularities so they are not overlooked or ignored.
  • Monitor and evaluate business performance and pay attention to the most important trends and developments.
  • Identify your company’s most important business fundamentals that represent value and stimulate growth.
  • Establish an effective framework to provide assurance, with management controls and internal and external audits.

Ownership

  • Formulate criteria for family members who want to become owners.
  • Draw up a shareholders’ agreement that establishes that the general management will be supported, what the succession objectives are (for example, that the company must remain in the family), which strategic decisions must be approved and how the profits that the company generates are spent and/or distributed.
  • Consider whether it makes sense to establish a family trust or family foundation in order to protect the family assets and realize the maximum tax benefit.
  • Ensure that the owner’s will corresponds with the succession plan.
  • Draw up a real estate plan.

Commence well on time so that you have a good starting position in order to take full advantage of your hard work.

Meijburg & Co can help you by scrutinizing your most important decisions so you are certain that they are as good for the business as they are for the family. We aim to establish a regular dialogue with you during which we discuss family and business issues. We help you to formulate a strategy for the future, with account always being taken of the fact that the family, the business and the ownership are inseparably bound.

All our services are provided by expert interdisciplinary teams that have experience of the influence of the family component in business decisions and governance.