While being a business family has significant differences to running a family business, many of the same fundamental principles for success apply. These include a clear purpose, vision & mission, open and transparent communication, a clearly defined organisational structure, and considerations around everything from finance to HR.
Within some family business, the nature of the company may dictate that members be focused on a specific area of business or industry, and the family’s identity is often forged in this arena. When the family exits their primary business, the evolution of their identity must continue and be found in new ways.
This can be daunting and challenging. Still, just as building a strong brand is vital to a business, so developing a shared family identity is essential to the success and continuity of the business family.
What’s perplexing is that the very entrepreneurs who’ve spent years tirelessly professionalising their businesses and generating wealth, often pay considerably less attention to ensuring that their personal wealth is protected and productive once their businesses are sold.
Numerous factors, both internal and external, can play a role in the erosion of family wealth. These include lack of strategic planning and long-term multi-generational vision and purpose development, fragmentation of inheritance, excessive risk-taking and bad investment decisions, unresolved family disputes and division, inflation, taxation, a failure to develop an entrepreneurial spirit across generations, as well as an insufficient separation between business and personal wealth.
Despite the widely-held “Three-Generation Wealth Rule” axiom, a total loss of wealth by the third generation doesn’t have to be inevitable. However, if family wealth is to continue to grow and survive across generations, it should be managed like a business.