How to make a family business survive beyond the founder

The latest saga of the Transcom Group heirs struggling over their inheritance once again highlights why family businesses often struggle to endure beyond the founder's leadership.

Most such companies in Bangladesh, and in many other places on earth, suffer due to insufficient governance structures, unchecked growth risks, and most importantly, neglect of succession planning. 

To improve their survival prospects, family enterprises must adopt strategic growth approaches, assess risks, and establish robust governance frameworks to facilitate smooth transitions across generations. 

The long-term survival and prosperity of family businesses hinges on adept management of business asset transfers and wealth succession, especially given the emotional, legal, and tax complexities that emerge during this time.

The current economic and political landscape, marked by the enduring effects of the pandemic, geopolitical tensions, impending recession, and technological advancements, intensifies these challenges.

Family businesses play a crucial role in economies worldwide, contributing to employment, innovation, and community development. 

Their unique blend of personal commitment, shared values, and long-term outlook fosters resilience and agility in navigating dynamic market conditions. 

Moreover, they often prioritise local engagement and social responsibility, fostering enduring relationships and trust with stakeholders. 

The preservation and growth of family enterprises not only sustain familial legacies, but also foster economic stability and diversity within communities. 

Thus, nurturing and safeguarding family businesses is vital for fostering sustainable economic growth and preserving entrepreneurial spirit across generations.

Family businesses play a pivotal role in South Asia's economy, constituting a significant segment of its economic landscape. 

A few years back, the PricewaterhouseCoopers (PwC) Bangladesh Family Business Survey highlighted critical concerns among family enterprises. 

In Bangladesh, 66% of family businesses identified accessing skills and capabilities as a paramount operational challenge, while an overwhelming 91% intended to transition management and/or ownership to the succeeding generation. 

The survey, encompassing 2,953 business individuals with annual turnovers exceeding five million dollars across 53 countries, uncovered distinctive challenges faced by Bangladeshi family businesses. 

Notably, Bangladesh experiences higher hurdles compared to the global landscape, with competence comprising 66% of challenges versus the global average of 60%. 

However, concerning innovation, Bangladesh's challenge stands at 63%, slightly below the global figure of 66%.

In Bangladesh, family businesses serve as the backbone of the economy, fostering entrepreneurship, employment, and economic resilience. 

Despite their vital role, these enterprises encounter unique obstacles, including skill shortages and succession planning complexities. 

The emphasis on passing on management and ownership to the next generation reflects the enduring commitment of Bangladeshi families to sustain their businesses' legacies. 

Addressing the distinct challenges faced by family businesses in Bangladesh requires tailored strategies that leverage innovation, talent development, and effective governance structures. 

By navigating these challenges adeptly, Bangladeshi family businesses can not only ensure their longevity, but also contribute significantly to the country's economic growth and development.

Family-owned enterprises serve as the bedrock of the Asian economy, playing a pivotal role in driving regional economic expansion. 

Within the Asia-Pacific region, an impressive 50% of Credit Suisse's top 1,000 family-owned businesses globally underscore the region's deep-seated entrepreneurial ethos and reverence for familial principles. 

Distinguished by their substantial market capitalisation, exemplars such as Samsung Electronics in South Korea, Toyota Motor Corporation in Japan, and Reliance Industries in India epitomise the formidable success achievable by family-owned enterprises. 

These entities epitomise the potential for remarkable profitability and sustained growth inherent in family-run businesses, particularly when guided by a far-reaching vision and innovative strategies geared toward longevity.

A defining strength of family-owned businesses lies in the unwavering commitment and fervour that family members bring to the enterprise. 

Their intrinsic dedication translates into a willingness to invest additional time and energy, recognising that each decision reverberates across the entire familial network, thereby fortifying the foundation of the business.

In Bangladesh, eight prominent business conglomerates have ascended to the esteemed billion-dollar club, according to the Bangladesh Bank report and the Export Promotion Bureau (EPB). 

These conglomerates encompass the Meghna Group of Industries (MGI), City Group, Abul Khair Group, S Alam Group, TK Group of Industries, Pran, and Square Group of Industries. 

Noteworthy is the diversified focus of these entities, with some spearheading import substitution industrialisation, while others lead the charge in the export sector.

Regrettably, within this cohort of billionaire companies, a conspicuous lack of structured succession planning is apparent. 

Moreover, the absence of robust corporate governance frameworks, especially concerning family business governance, poses significant challenges to their competitiveness and long-term viability. 

It is imperative for companies to devise and implement tailored Corporate Governance Methodologies that specifically target the governance intricacies inherent in family or founder-owned enterprises.

Effective planning and governance are vital for family business prosperity and wealth preservation. 

Despite shared successes and values, challenges like conflict and communication barriers can impede growth. 

Addressing common issues and implementing mitigation strategies fosters cohesion, ensuring sustained prosperity for the business and family alike.

Absence of innovation 

Within the context of family businesses, a notable issue arises from the lack of innovative ideas. Compared to larger corporations, family-owned enterprises often lag behind in adopting cutting-edge technologies and innovative approaches. 

Family members, who typically play key roles in these businesses, may demonstrate reluctance to think creatively and embrace advanced methodologies. 

While such rigidity may have been tolerated in the past, in today's rapidly evolving business landscape, organisations lacking innovative strategies and robust infrastructure face significant survival risks. 

It's evident that despite their prevalence in Bangladesh's corporate sector, many family businesses operate in a non-innovative manner, potentially hindering their long-term viability and competitiveness.

Being open and clear about succession plans

Succession stands as the paramount challenge for family businesses, demanding early consideration and transparent communication among family members. 

Effective succession planning becomes indispensable for the survival of a family enterprise, particularly in the face of unforeseen circumstances like illness, death, or emotional turbulence within the family. 

Establishing a comprehensive succession plan facilitates the identification and nurturing of executive talent, ensuring seamless leadership transitions and business continuity. 

In Bangladesh, where family businesses are prominent, prioritising succession planning holds even greater significance. 

The country's unique socio-economic landscape underscores the importance of transparent and well-structured succession processes to safeguard the longevity and prosperity of family-owned enterprises. 

Family disputes

Family businesses face disruptions from physical, financial, and emotional challenges. Conflicts like intergenerational tensions and sibling rivalries often lead to disintegration, fracturing prominent companies.

Place the right individuals in appropriate positions

It's essential for family members in the business to understand their roles and contributions. Recognise and leverage your children's unique strengths by assigning them aligned responsibilities. 

By letting each child focus on their strengths, create a harmonious work environment where everyone thrives. This ensures added value across different aspects of the business. 

Running a business doesn't mean your children are corporate-bound, nor guarantees leadership desires. Have candid talks about their career aspirations to understand their place in the business without presumptions.

Financial management

Family businesses struggle with delineating personal and business finances, risking instability. Clear financial policies manage cash flow, investments, and debt. 

Proper accounting and reporting boost transparency. Seeking professional advice and crafting long-term strategies sustain financial health and growth, fostering stability and success across generations.

Effective governance in family businesses demands best practices. Clear roles and dispute resolution processes are crucial. Regular family meetings aid communication and alignment. 

Transparent decision-making fosters trust. Involving a neutral third party ensures fairness. A well-defined succession plan ensures continuity and smooth transitions, ensuring the business's longevity.