businessstartups - ProFile 3 UNIT 11 Business start-up...

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Unformatted text preview: ProFile 3 UNIT 11 Business start-up IMPORTANCE OF FAMILY BUSINESSES A great many of the world’s most famous companies started their lives as family firms. They most commonly consist of a founder owner or couple, although one in five are partnerships between brothers and sisters. When family businesses grow, they may decide to offer shares in the firm to outsiders. Eventually, very few of the long-lasting businesses actually remain under direct family control. The majority of shares are owned by non-family members, and professional managers may assume the running of the company. Nevertheless, around 40% of America’s top 500 companies retain a substantial influence of the founding family. SUCCESSION DIFFICULTIES Globally, only around a third of family-owned businesses survive from one generation to the next. By the third generation, only about one in twenty is seriously financially viable. Second generation family members may not have the motivation or know-how of the founder, or else they may want to sell up to release the capital represented by ownership of the company. However, a common reason for failure is tied up with succession. There may not be an obvious successor to the founder, or there may be disagreements between family members as to who might be best. The eldest son does not necessarily make the best successor. This often leads to bitterness and family feuds and quarrels. See the ProFile Student’s site: A GROWING PROBLEM In recent years, succession has become a hot issue. Many firms were founded in the years following WWII. This means that the founders are in the process of retiring or have died. Many of these businesses have already experienced, or are in the process of experiencing a change of leadership. This often occurs in a state of crisis because no successor has been named, an unsuitable successor has been chosen, or there is disagreement among the family members. SUCCESSFUL SUCCESSION Where succession is carried out successfully it is because it has been carefully planned beforehand. The founder owner trains up the successor and gradually hands over the reins of the company. The longer the owner stays on past retirement age, the more difficult they find it to leave. LONG-TERM SURVIVAL The long-term survival of family businesses seems to include the following elements: • • • • a clear long-term strategy directors including non-family members regular meetings of family members very clear rules about how family members can qualify for a job in the firm. Source: a special report on family business from the Economist Nov 6th 2004 Photocopiable © Oxford University Press ...
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