May 14, 2010

Brent Banda answers family business questions in Globe and Mail feature

The Globe and Mail has posted a special feature on issues facing family businesses. Brent Banda was asked to answer reader questions from a strategic marketing perspective.

The results of this Q&A session have been posted on The Globe and Mail website (click here to read the full feature) and a summary of Brent's commentary is included in this article as a resource for anyone involved in a family business. Please feel free to share this information or send a link to this page to anyone who might find it useful.

How do I help take the family business to the "next level" without insulting someone who has spent their whole life getting it to this level?

Ask the exiting family member for assistance in developing a business plan to drive long-term growth. If both generations collaborate in this planning process, both will feel ownership to the direction of the plan and genuinely view this next phase as a natural step in the historical growth of the business.

The process of crafting this plan has considerable value for the organization. First, this document helps with transition and functions as a bridge between generations. Second, the collaborative effort will result in practical and realistic plans for future growth.

Both people must be flexible to accommodate the other's point of view. For example, a family member that is exiting the business may prefer to preserve capital while the younger generation may wish to risk 'the war chest' to aggressively pursue growth. In this case, it may make sense to take a moderate approach to growth that reduces risk. A market penetration growth strategy (expanding market share in your current lines of business) is far less risky than expanding through diversification (entering a new line of business you are currently unfamiliar with).

What would be a key component in each of the four experts' services that would convince a founder to establish a succession plan, as well as pursue this exercise now - not later - when retirement is near?

A succession plan involves more than transfer of equity. It involves transferring the business to a new generation of owners who must make complex business decisions.

My work with family businesses involves the nuts-and-bolts planning and strategic marketing for long-term growth. A carefully considered growth plan will address the issues of the day while helping prepare the business to operate without the founder. This can serve as the comfortable first step in a broader succession planning process.

Does any family business really survive the death of the founder?

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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