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Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
Family Business Dynamics
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Family Business Dynamics

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Training Course Summary

Training Course Summary

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  • 1. Family Business Dynamics INTRODUCTION • Family Businesses are the oldest and most wide spread form of business structure. • They are potentially the most powerful business structure in the economy • Many of the largest companies in the world have developed from and still are family businesses • Despite this, they are the least studied and understood structure in the economy. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 2. Family Business Dynamics BUSINESS STRUCTURES Before looking at the dynamics within a Family Business it is necessary to first differentiate between a Corporate Business structure and an Entrepreneurial Business Structure. The key difference between the two is the question of “Ownership”. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 3. Family Business Dynamics BUSINESS STRUCTURES “Ownership” of the business in the corporate sector is in different hands to that of the “business” (Shareholders/Directors) In an entrepreneurial structure “ownership” and the “business” are in the same hands or at least overlap. (Owner/Manager) Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 4. Family Business Dynamics Corporate Entrepreneurial Structure Structure Ownership Ownership Business Business Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 5. Family Business Dynamics BUSINESS STRUCTURES The question of ownership is a critical distinction because when ownership and the business overlap, so do business decisions and personal ambitions. In this case it is essential to establish the personal ambitions of the owner/CEO because the strategic plan for the company, that will ultimately be implemented, will be one that satisfies the owner’s personal ambitions whether this is done consciously or unconsciously. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 6. Family Business Dynamics FAMILY BUSINESSES The vast majority of entrepreneual companies are small and medium sized enterprises (SMEs) In most developed economies the SME sector represents at least 60%of the national GDP and of this 60%, at least 60% will be Family Business. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 7. Family Business Dynamics FAMILY BUSINESSES Family Businesses come in all shapes and sizes and range from multinational giants such as Caterpillar, with $100 billion turnover, to the corner store with less than ₤100,000 turnover per annum. But, no matter what their size, the “family” Now becomes and additional critical factor that has to be analysed in addition to those of “ownership” and the “business” itself. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 8. Family Business Dynamics FAMILY BUSINESSES Ownership Family Business Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 9. Family Business Dynamics DEFINING A FAMILY BUSINESSES Family members do not have to actually work in the business to make the company a family business. In fact, people involved in a family business can occupy one of 7 different positions ranging from, simply being a member of the family, to having an equity stake in the business, to working in the business or any combination of these. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 10. Family Business Dynamics Ownership 2 4 5 7 6 1 3 Family Business Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 11. Family Business Dynamics ROLES WITHIH A FAMILY BUSINESS These differing positions create complex forces within the company, not only because of the differing motivations, dependant upon the positions occupied, but also because these positions are not static. . Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 12. Family Business Dynamics ROLES WITHIH A FAMILY BUSINESS Over time, the roles of different members of the family will change • children grow up, • the owners become older • other members are introduced through marriage, divorce or even death Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 13. Family Business Dynamics CHANGE WITHIH A FAMILY BUSINESS • Not only are the roles of the “Family” not static, • but also the “business” itself changes as it moves through different phases of growth. • Additionally, there are often changes in “ownership” either due to the need to raise additional capital or to provide either reward or inheritance benefits. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 14. Family Business Dynamics CHANGE WITHIH A FAMILY BUSINESS Although there are typically 7 stages of company growth and 7 possible changes to the family, for the purposes of illustration only 3 stages of change have been identified for each of the components of a Family Business. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 15. Family Business Dynamics Cousin Consortium Sibling Partnership Controlling Owner 2 Ownership 4 5 7 Family Business 6 1 3 Enter Business Start Up Work Together Growth Passing Baton Maturity Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 16. Family Business Dynamics CHANGE WITHIH A FAMILY BUSINESS One of the most dangerous periods of change for a Family Business is when ownership is transferred from one generation to the next. If this is not planned well in advance, understanding the dynamics that are at work, there is more than an even chance that the hand over will not succeed and that the Business will in fact close. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 17. Family Business Dynamics MANAGING A FAMILY BUSINESS In order to effectively manage a family business it is therefore essential to understand • The personal ambitions of the owner/manager • Who the family members are and which positions they hold • The stage of development of not only the business but equally the family and the ownership • What changes will occur both short and longer term and what impact these changes will have on the business. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 18. Family Business Dynamics THE STUDY OF FAMILY BUSINESS Unfortunately, many business schools do not differentiate between corporate and the entrepreneurial structures and as a result personal motivation is ignored when discussing Strategy. In many cases Family Businesses are totally ignored by business schools and the core topics such as management, strategy, finance, marketing, production and accounting are taught without differentiating between family and non family business. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 19. Family Business Dynamics THE STUDY OF FAMILY BUSINESS The economic models, underlying most management science, depends upon the inter changeability of decision makers so that it does not make any difference “who” anybody is. This is clearly not the case in Family Businesses. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 20. Family Business Dynamics THE STUDY OF FAMILY BUSINESS Many management consultants do not recognize that a business is in fact a family business. And even if the do, they are unaware of the dynamics within such an organization and consequently they fail to understand why seemingly sound proposals based on management models are either ignored or simply not implemented. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 21. Family Business Dynamics When the dynamics within a Family Business are recognized and managed, a Family Business can be a dynamic force in business. When they are not, a Family Business can tear itself apart. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth
  • 22. Family Business Dynamics When Sigmund Freud was asked what he considered to be the secret of a full life he answered “To Love and To Work”. For most people, the two most important things in their lives are their families and their work. It is therefore easy to understand the potential power of organizations that combine both, family and work, into one enterprise Which we commonly call A Family Businesses. Business Solutions 4 You Ltd Copyright © Business Solutions 4 You Ltd 2008 All rights reserved Structuring Businesses to Create Personal Wealth

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