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Family business questions from readers answered Add to ...

During the lifetime of the founder the business must change with the competitive environment in which it exists. Once the influence of the founder over a family business is no longer germane, it is unlikely to remain exactly the same. Most founders want to see their business grow and succeed. Change is part of that growth. The best way to facilitate that growth, even after the death of the founder, is to have sound planning in place well before the unfortunate and often unpredictable event.

Advance planning and the implementation of sound legal structures will go a long way toward facilitating the orderly transfer and survival of the family business. Every business should have a plan to deal with the death of the founder. The plan needs to identify individuals who will take the helm upon the death of the founder. These individuals should ideally share the vision and missions that the founder has for the business. They must be trained in the operation of the business. Systems and processes should be established for the efficient transfer of the rights, obligations and knowledge of the business to the survivors.

The family business should be properly structured or reorganized as to permit the efficient transfer upon the death of the founder. Contractual obligations should include mechanisms that permit or contemplate the transfer of ownership. Redundancy systems should be put in place to ensure continued access to operationally imperative information. Mechanisms for effective knowledge transfer of key operations must be implemented. A plan should be established for continuity in the event of significant business interruption, such as a pandemic or a major interruption to key resources. In addition, a family business should have a plan for the retirement of the founder. Assuming a family business is being operated prudently, having these plans in place will facilitate its survival even after the death of the founder.

Sandra Harvey: Yes, a family business can survive and continue to prosper after the death of a founder but the question highlights some important factors for any business, but particularly family business.

1. Remain respectful of the past, and build from the lessons that have been taught and learned over the years.

2. Focus on the positive: the contributions and foundation the founder has provided rather than the negative of the loss of the founder.

3. New leadership is key in order for the business to remain focused and move forward. Staff need to feel that someone has control and that their contributions matter.

4. Planning is vital. Ensure that all information and knowledge is not held by one person, but rather held by the business. Documentation of processes and history is important so that if anyone should leave the business for any reason, the business can survive. Empower the people that are left to be able to continue. This rule applies for any business owner at any point in time.

Brent Banda: Absolutely. But steps must be taken to prepare for change that inevitably must take place.

Ideally, the founder would remove his or her own personal influence on the business over a period of years. For example, it’s feasible that 20 years ago the founder entered a handshake deal with a supplier and that relationship is now integral to your business. That relationship has potential to deteriorate over time with the founder’s departure. What can we do today to ensure that arrangement remains in place for another 20 years?

The founder’s personal influence can also materialize in the company’s brand image. Founders are often magnetic personalities, and the company’s reputation may be built on decades of their own individual public exposure. The founder is the business. Care must be taken to adjust the company’s reputation so the business will benefit from the credibility and history of the founder, but also reflects the additional depth and substance of the broader organization. Adjusting a company’s brand image is a fundamental component of a strategic marketing plan and must be carefully managed over a period of time. It is best not to tackle this task the day the founder leaves the business.

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