The Indian economy has many businesses owned and managed by families. With the passing decade, one generation transfers the power to the next in hopes of keeping the tradition intact and bringing in a newer perspective to make the business more adaptable to changing times. However, improper planning, no definite strategies for success, and a negligible attitude toward the resources and revenue, ultimately break the cycle of age-old success.

Managing any sort of business is no cakewalk. Not all days would be sunny, and not all days would seem like a nightmare. However, a vision to take the brand forward keeps things smooth and functioning. When it concerns a family business, there must be a definite balance between the business goal, the family legacy, and the relationship.

The foundation of a successful business is to become sustainable and stay grounded no matter how much wealth it procures. 70% of the family-owned business is either sold to another big buyer or just simply fails before it is the time to pass down the entity to the next generation. But there is more than one reason behind family business failures.

Inappropriately Planned Succession

Planning succession of the family-owned business is not a one-day job. The passing down of business to a potential heir must be meticulously observed. Most entrepreneurs are hesitant to pass down the roles and responsibilities to another deserving candidate due to power, vision, trust, etc. But a blueprint must be laid for choosing the next potential leader and grooming them with a newer business model.

Hesitant to Changing Market trends

Family-owned businesses and even other entrepreneurs without a family background can resist the changing market trends. Today the business economy has adopted newer means with the help of technology. So when businesses become adamant about not making relevant changes in the industry, it would ultimately fall from the height of success.  

Conflict between Families

Transferring ownership from one generation to another witnesses many objections from other family members. One might have aspirations to come into power and design the business based on their sensibility. So if the family business management does not include a transition that explicitly mentions how to manage objections or conflicts coming towards a mutual goal, it certainly disrupts the business operation.  

Competitive market

The market is wide and open, especially for new market players trying to tap on the resources and build their brand.  The growth challenge is so intense that customers have several options, costing less to their pocket. So to survive in the market, old family-owned businesses should understand what new and better they can offer to the customers without becoming irrelevant in the new age.  

Generation Gap

Succession Planning is meant to give the next generation a better view of the values and missions that have been established for the business. If there are disagreements between the preceding and coming generation of business leaders about how the operations should be managed, then meeting halfway is crucial. No one party should be adamant about their belief system else, the downfall of business is evident. 

No suitable leadership quality

Business entrepreneurship says a leader should manage all business domains efficiently. Being a leader isn’t enough to determine the scenario and swiftly change their leadership style. The entire organizational structure will suffer if the business head doesn’t prove to be a good leader.  

Hard to trust Advisors

Every family business has some fixed advisors helping to make the right decisions financially and otherwise. However, Staring from lawyers to accounts, everyone will have a role to play. Hence, they must always be from the inner circle.  

Lack of proper education for next leaders

You might be considering involving a specific candidate in the family business, thinking of their potential. But if the potential heir is not adequately educated or does not wish to pursue any degree program relevant to the family business, then they would not be able to become efficient managers or understand the XYZ of a company.  

Final Takeaway

Running a family business needs a proper understanding of the business values and ethos which makes up the entity while owning a roadmap to shift the power dynamic efficiently. To reduce the failure rate of a family-owned business, it is necessary to groom the next generation with relevant skills. At MIDAS, we indulge the coming-of-age entrepreneurs in experiential learning, making them embrace the right ideas to run their family business or be part of it. To know more, click here.