Download - Family business succession & growth
![Page 1: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/1.jpg)
Family Business Succession and Growth
Presented by: Rikita Agrawal (26) Pallav Pandya (19)
Entrepreneurship Development Institute of India (EDII)
![Page 2: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/2.jpg)
Family Business
• A family business is a business in which
– one or more members of a family have a significant ownership interest
– significant commitments toward the business overall well-being.
– where the voting majority is in the hands of the controlling family including the founder(s)
– intend to pass the business
![Page 3: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/3.jpg)
Some important facts about FB
• 90% ventures owned and managed by family
• 1/3rd (around 33%) of which survive till 2nd generation
• 10% till to the 3rd generation.
![Page 4: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/4.jpg)
Building Blocks
• Major building blocks which responsible for the health of any FB are;
– The family
– The business
– The individual
![Page 5: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/5.jpg)
Frequency of Conflicts
• 42% family businesses dealt with conflict three to four times per year
• 60% dealing with particular issues before a larger conflict
• 40% no communication about conflicts until a crisis takes place
![Page 6: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/6.jpg)
Advantages
• Commitment
• Knowledge Continuity
• Reliability and Pride
Disadvantages
• Hesitates in appointing outsides talents
• Believe better to be 100% owner of stagnant business than to be 80%
owner of a growing business
• Lack of trust on next generation
![Page 7: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/7.jpg)
• This high rate of failure among family businesses is attributed to a multitude of reasons. Some of these reasons are the same ones that could make any other business fail such as – poor management,
– insufficient cash to fund growth,
– inadequate control of costs,
– industry and other macro conditions.
Common reason for the failure of any form of business
![Page 8: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/8.jpg)
Reasons for the failure of FB
• Complexity
• Informality.
• Lack of Discipline.
![Page 9: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/9.jpg)
Conflict occurs?
• Lack of communication
• Lack of proper definition of boundaries
• No shared vision and mission
• The goals of a given family member does not harmonize with that of the family business
• Lack of information
• Disbelief of leaders in next generation
![Page 10: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/10.jpg)
Conflict GOOD or BAD??
• BAD – Takes away attention from critical business issues
– Undermines self worth
– Leads to division / faction information
• GOOD – Results in clarification of important issues
– Leads to solutions to problems
– Encourage people to think differently
– Generate new ideas
– Help release emotions
![Page 11: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/11.jpg)
Addressing these
• Annual Family Business Retreat
• Monthly meetings
• Governance structures such as a Family Council
• A written and shared Family Mission Statement
• Defining the operational systems
• Creating entry criteria for new entrant
![Page 12: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/12.jpg)
These measure always solve conflicts ts
• Not always
• Many times these issues measure dose not solve conflicts & leads to litigation & hence breakup of Family business
• Which in turns results into decreasing economies of scales
• Also the business which was successful due to varied skills of different family members which is spread due to breakup such business flops when divided
![Page 13: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/13.jpg)
Types of growth
Organic growth
Inorganic growth
![Page 14: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/14.jpg)
• A business grow organically means that the company is using internal funds to expand the business, rather than purchasing another business or thru other partner-sharing business. An example of organic growth will be increasing capital using own money.
Organic growth
![Page 15: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/15.jpg)
Inorganic growth
• A growth in the operations of a business that arises from mergers or takeovers, rather than an increase in the companies own business activity.
• Firms that choose to grow inorganically can gain access to new markets and fresh ideas that become available through successful mergers and acquisitions.
![Page 16: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/16.jpg)
Succession plan
• Confidence level of family in next generation
• Entrance criteria had to be build
• Delegation of authority
• Choice & timing of successor
• Grooming of future leader
• Emergency transition Arrangement(EMT)
• Prepare FMS (Family Mission statement)
![Page 17: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/17.jpg)
Ensure growth by ensuring proper governance
• A proper governance by making
– Family council
– Family assembly
– Business Board
![Page 18: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/18.jpg)
Role of leader
• To develop mechanism for;
– Control
– Careers
– Capital
– Conflict
– Culture
![Page 19: Family business succession & growth](https://reader034.vdocuments.us/reader034/viewer/2022051609/547b5f07b479599f098b4d6b/html5/thumbnails/19.jpg)