Family Business Planning

(The Money Pros) - Though the survival statistics for the family business enterprise are somewhat frightening (see below), based on my experience as a family business advisor a family business can perpetuate itself through multiple generations. As a tax professor at Bryant University, I teach succession planning, with a particular focus on income and estate tax planning considerations, but these are not the most important issues a family business must face. As with many major decisions, sometimes it is beneficial to look to those that have successfully gone through a similar situation before to learn how they did it. Family business planning can take advantage of the experience of other families, even though the dynamics of every family are often different.

Dr. William T. O'Hara, President Emeritus of Bryant University, has written an excellent book called Centuries of Success, which chronicles the success of some of the world's oldest family businesses, such as Kongo Gumi the Japanese contraction firm that was founded in the year 578 and is still run my members of the family for 1433 years.

This book summarizes the history of 20 family enterprises and identifies the key lessons and legacies that are attributed to their ability to defy the statistics. This is a list of some of the common factors these companies shared.

1. Respect for the family and it's heritage
2. Embrace open communication between family members
3. Willingness to reinvent the family business
4. Require family members to obtain experience outside the family business
5. Establish a team of advisors from outside the family
6. Consideration for their employees and community

I recommend that members of a family business read this book, as a part of developing a succession plan, as it will provide insight into myriad of ways successful succession planning can be accomplished.

Only 40% of family owned businesses survive to the second generation, 12% to the third, and 3% to the fourth (Boston Globe, May 4, 2003)

The majority of family owned businesses have no formal succession plan in place (Laird Norton Tyee Family Business Survey 2007)