Family Business Consulting Service: An Overview
Family businesses are prevalent all around the globe they are an essential part of the economy of countries around the world. Family-run enterprises create employment opportunities for the working class and have a better business culture in comparison to new business ventures. However, it is crucial that your family business be managed and governed by an outside and neutral consultancy to sustain it in the long run. This is because there are a lot of legal and social hindrances that may affect the operations of your family-run empire. Enterslice is a top consultancy firm that has over 5000+ satisfied customers. We provide consultancy services to family-run businesses in the areas of legal, taxation and financial advisory.
What is a Family Business?
A family-owned business is a business structure that is owned, operated or handled by members of a single family. The family members should be blood-related, related by marriage or adoption. It is quintessential to note that the family-owned business should be owned by a minimum of two members of the family and should contain the following qualities:
- The family should hold the majority percentage of the business ownership
- The voting system has to be in the control of the family
- The family possess the power in the strategic decision-making of the business
- The business involves multiple generations of the same family
- The family members draw the senior management
Family businesses have always been an effective economic tool for countries all over the world; this is one of the oldest forms of corporate structures available in the history of businesses. They have always made a substantial contribution to the GNP and GDP whilst positively affecting employment, import-export and growth of the country.
Generally, there are three types of family businesses around the world, namely;
- Family Owned Business
- Family Managed and owned Business
- Family Led and Owned Business
Family-owned Business: Advantages and Disadvantages
The advantages and disadvantages of a family-owned business are as follows
- Stability: Family Business setups offer stability as the leadership is often or not changed very vigorously. This offers much-needed longevity. Even in the condition that the upper administration is changed, the values of the leadership remain intact in the business.
- Commitment: Family Businesses are inclined towards providing responsibility and accountability than the non-family businesses
- Flexibility: A family business offers a much more flexible management structure than a non-family business structure, as the family members can come out of their shells and take up roles that are outside their working capacity.
- Long-term Outlook: Non-family firms have to formulate plans for the coming quarter, while family firms can think of the goals decades ahead. This long-term perspective can foster transparent decision-making culture throughout the business.
- Lack of Family Interest:The Future generations may present their disinterest in joining the family business because of the factors like a boring business line, a pathetic labour force and no growth.
- Conflicts Between Family Members: There might be conflicts amongst the family members due to the structuring and participation in common business. The boundaries between the professional and personal conduct of the family members may result in conflicts and problems among the members.
- Lack of Structure: One of the most significant disadvantages of running a family business is the lack of proper governing structure. Lack of structure leads to chaos among the family members and creates a void in the business sphere of the family.
- Nepotism: Family businesses tend to promote inexperienced family members to key managerial positions within the organisation, which leads to creating a hostile atmosphere within the entity. Loyal employees lose faith in the business's operations, which makes all the problems.
- Succession planning: Proper succession planning has always been an issue in family businesses all across the globe. Without a proper succession plan, the leadership of the company is always on dangerous grounds.
Services Offered by Enterslice
Managing a family business offers a lot of complexities, Enterslice has been a top consultancy firm for over 200+family enterprises all over the globe. We provide the following services to our clients.
Drafting a formal Family Constitution
A Family Business constitution captures all the critical rules and regulations needed to be adopted by the members of the family in order to successfully run a viable business model. These rules need to be coded, agreed and documented for the sake of clarity amongst the family members. These rules broadly govern and guide the family members on the matters of ownership, privileges, performance and management of the family business. This document also captures the roles and responsibilities of each and every member of the family that is part of the business run by the family.
The family business constitutions also provide various streamlined processes that are carried out by the family members, which include escalation of decision-making and setting up the hierarchy of the family members in the business chain. It is quintessential to mention here that the business. Codification of all these pointers is integral for running any business, as these provide the much-required escalation matrix and formalise the rules and regulations for the family members.
Drafting a Family Constitution is an essential step in successfully running an organisation. These rules and regulations make the business much more practical and avoid chaos. These well-defined rules and regulations are vital for the perpetual existence of any company around the world.
The following features are necessarily added to the family Constitution
- A brief History of the Family Business
- Oral Traditions to be formally coded
- The coded distinction between the tasks of the family and the company
- Process of disposing of the family business
- Joining forms and criteria
- Dispute Redressal mechanism
- Responsibility held by each and every member of the family
Succession Planning Service for the family members
One of the significant problems family businesses face worldwide is the inability to plan a valid succession for their business entity.Succession planning is important as business leaders don't have perpetual existence. In a non-family business, succession does not create much of a hindrance. Family businesses around the world face such problems and to curb this severe issue formulating a Succession Plan is important for any business. Consultants around the world provide guidance in managing succession upon considerations from the current family leaders and the experience of each and every successor of the family. This plan is generated based on the qualifications and posts held by each family member. Formulating a succession plan enables a more precise picture which leads to efficient business planning.
Family Business Strategy Formulation
Determining a solid businessstrategy is essential. It enables the business to ascertain the growth areas and aspects it needs to improve its performance. A business strategy plan contains the following elements of a business.
- Target Market
- Products and Services Expansion
- Technological Expansion
- Onboarding the Right Talent for your organisation
- Practising financial prudence to retain profitability Creating a financially suitable business model
- Being relevant to the ever-changing market demands. Effectively reviewing and positively reacting to the dynamics of the market.
- Making sound operational and functional strategy whilst retaining the core values of the business
Along with this, it is also important that a business advisory board be established by the business to achieve its targets. This board will comprise the eldest and most experienced members of the business, along with a neutral third party of the business.
Family Wealth management
Family Businesses often have to suffer huge setbacks due to unsound financial planning. We at Enterslice manage all the investments and financial goals to be achieved by the business. We have certified family wealth planners who provide end-to-end consultation in handling all the financial needs of family businesses. It is also important that the funds are utilised and invested so that the business thrives without any risks of insolvency.
Accounting and Legal management
A family business has to manage a variety of departments for the proper functioning of the whole entity. Hence experts must manage their legal and accounting verticals.
Enterslice offers end-to-end assistance in maintaining the following legal processes for your family business.
- Contract Lifecycle Management
- Litigation Support
- Documentation and paralegal support
- Drafting and vetting of legal documents
All these services require expert assistance, our expert Advocates and paralegal will provide end-to-end solutions to provide all the necessary legal assistance to the business.
The Accounting service will be handled by our experienced team of CAs and accountants with hands-on experience managing all the processes seamlessly. The accounting Services consist of the following:
- Bookkeeping and accounting management
- Financial statements and reports
- Financial process improvement
- Accounts receivable management: billing, invoicing, etc.
- Accounts payable management
- Payroll management
Setting up Family Governing Council
Setting up a family Governance council enables smooth and holistic communication among all the family members. This creates opportunities for the members to perform their roles and responsibilities seamlessly. This platform helps the business thrive as it tries to maintain important communication amongst the members regarding the current business performances, developing future goals and clarification regarding the responsibility endowed to each family member.
A family council also acts as a dispute redressal forum for the family members. In a family business, the complexity of operations is higher than in a non-family business; hence there must be a dispute redressal mechanism to avoid any disagreements between the members. A drafted governance council can be a very good option to create a forum working towards resolving disputes between the family members to create a seamless business operation.