Sunday, August 9, 2020
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The Self-Aware Family Business:

Building Strategy through Family Business Assessment

There’s an old saying that the unexamined life is not worth living. When looking at that theory from a family business standpoint, we can see that much the same is true. The unexamined family business, while still “worth” the efforts of its contributors, may not have much life left in it. Even those family businesses that are enjoying a season of extraordinary growth and success may soon realize that their initiatives steer the business off course because of the lack of self-assessment along the way. 

Without such an examination, work becomes automatic, rather than strategic; reactive, rather than proactive. Only by truly delving into the deeper levels of what makes your business tick can you truly begin to marry your tangible and intangible assets with your strategies and performance. To begin, work with your family business partners, key contributors and business unit leaders in a discussion about the following.

Communication and Family Relationships

Let’s start with the one thing that makes family businesses so unique: the family dynamic. It is this family component that makes managing family businesses so complex, so be sure to assess whether your family dynamic is a healthy one.

Do your family members:

  • Communicate well?
  • Know your family business mission?
  • Agree on a business vision for the next five years?
  • Meet regularly to discuss family matters?
  • Resolve conflict well and in a methodical way?
  • Reach compromises or make decisions well together?

If you’re unsatisfied with any of your answers, what underlying factors are at hand? If you are satisfied with your answers, what strengths factor into your family’s healthy dynamic?

Planning and Strategy Development

Next, dive into how well your family business takes on planning and strategy development activities.

  • What are the short- and long-term business goals for the family business? Do all your family business leaders take ownership of these goals?
  • What short- and long-term initiatives could you set in place to profoundly improve your business?
  • Do your family business leaders meet regularly to discuss planning, strategy development, staffing, initiatives, etc.?
  • How meaningful, strategic and relevant is your family business mission statement?
  • Do you or should you employ a board of directors?
  • How do you know whether your customers are satisfied?
  • What factors are critical to the success of your family business? (Key personnel, lack of competition, etc.)

SWOT Analysis

Spend some time talking to your family business partners and management team about the firm’s strengths, weaknesses, opportunities and threats.

  • What does your family business do that makes you the most proud?
  • What are the strengths of your business in its operations, administration, sales and marketing?
  • What things about your family business frustrate you the most?
  • What are the weaknesses of your business in its operations, administration, sales and marketing?
  • What are your most significant short- and long-term threats in competition, market trends and other external as well as internal factors (such as staffing and aging technology)?
  • What opportunities do you have to improve your team or your business (i.e. training, new product introductions, etc.)?
  • How profitable is your business relative to your competition and why?

Employment Policies

In a family business, employment becomes a particularly sensitive issue. For starters, there can sometimes be a sense of entitlement in family businesses – to receive more pay, to get a promotion, etc. When the entitlement is not actually there, non-family members can perceive it to be there anyway. The key is to be as unbiased as possible, and to ensure you have written policies in place regarding your organization and employment. Consider the following as you assess your employment policies:

  • Do you have a written organizational chart and job descriptions? Do you abide by it?
  • Are all employees (family and non-family) required to meet specified job description requirements? Are those job descriptions quantifiable, accurate and supported?
  • What requirements do you have in place for promotion to management?
  • Are employee family members compensated in accordance to market standards?
  • Are bonuses or dividends based on established rules or criteria? Do these rules account for the needs of the business itself in a balanced way?
  • What requirements does your family business have for ownership?
  • Do you conduct routine performance reviews?
  • Do you welcome employee feedback?
  • How does your family business recruit new employees? How satisfied are you with the end result (the hire)?
  • How do you feel about the staff you have in place right now, including family members?

Succession Planning

Now think about the future of your business and the future generations.

  • Do you have a formal succession plan in place? If so, on what criteria did you evaluate your successor’s qualifications – and is a clear leader defined?  If not, why not?
  • Does your succession plan include plans for management?
  • Do you have buy-sell agreements and insurance policies in place to ensure future owners have the liquid funds needed to purchase ownership shares from departing owners?
  • Do you have a plan to provide for your retirement?
  • In the next generation(s), is your business likely to be owned and/or controlled by a single leader or a team? If a team, how will decisions be made?
  • In the next generation(s), is your business likely to be owned by family employees and family members not involved in the business? If so, how will balanced decisions be made?
  • How dependent is the family business on you?
  • If you don’t have family members interested in taking over the business, what is your plan B?

Estate Planning

Again, because of the family component in your family business, estate planning is especially important. Consider whether you have all the necessary estate planning measures in place.

  • Do you have current wills and trust documents? Powers of Attorney? Declaration for Desire of Natural Death? Written funeral arrangements? Are these documents consistent with your family business documents, such as any buy-sell agreements?
  • What decisions have you made to reduce estate taxes? Are these decisions consistent with the wishes of family members? Do these decisions negatively affect tax burden at a later date (such as upon the death of your spouse)?
  • Do you have insurance benefits excluded from your taxable estate?
  • What entity structures, such as FLPs or LLCs, have you established?
  • Have you taken steps to title your assets in a manner that takes advantage of estate tax laws?
  • Do you have plans to transfer your wealth gradually?
  • Will your wealth be transferred in relatively equal portions to your heirs or in some other manner?

Rewards and Quality of Life

Now that you’ve considered a variety of aspects of your family business, consider one more thing – yourself. How your family business adds to – or detracts from – your quality of life, and how rewarding the family business is to your life really matters.

  • Does your family business enhance or diminish your quality of life?
  • What rewards does your family business provide to you? What do you want it to provide?
  • Do you feel like you enjoy a high-quality work-life balance?
  • Do you ever take real vacations?
  • Do you manage time well? If not, how could you improve?


After honestly and thoughtfully answering these questions, you should know a good deal more about your business, your family and yourself. Equipped with this insight, you can better develop strategies to address business growth, human resources, succession planning and much more. Just remember that your answers to these questions may continually change as you, your family and your business changes, so be sure to conduct a family business self-assessment on a regular basis.

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