Four tips for your family business to last | INCAE
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Four tips to make your family business last

20 2018 August
INCAE Masters

The Latin American market is so competitive and volatile that running a business is no easy task. The matter is even more complicated when it comes to a family business, as they face additional challenges around generational change, risk tolerance and flexibility.

According to data from Fundes Latin America, only 3 out of 10 family businesses go to the second generation and only 7% reach the third. The scenario is difficult, but the business can take certain measures to help it survive.

Create a family protocol

This document brings together all the important juridical-legal aspects, it is a series of personalized rules for each company where aspects of ownership, transfer and share price are regulated. It also stipulates who the shareholders can be, the requirements that family members must meet to work in the company, among others.

Establish a succession plan

 This plan defines who will assume leadership in the following generations, both in the position of the founder and in the key managements. The best thing is that the relief is planned in an organized way, before the situation arises, so that there are no complications in the operations of the company. If nothing is in writing, there can be an unnecessary internal fight between the different lines of descent, each proposing the candidate that seems to them suitable.

Analyze the market and know your customers

Customers are constantly changing preferences, so if your company has already been under the same model for several years, all the more reason you should do a review. A very valuable tool is the business model canvas, as it allows us to have a clear picture of whether what we do is profitable.

It consists of a diagram that allows you to visualize your business model identifying aspects such as: your value proposition, who your customers are, the channels you are contacting, income, costs, among others. (To learn how to make it, you can see this mini workshop gratuitous).

Strengthen the team

It is common for the company to have friends and family of the founder from the beginning. While your experience and knowledge of the business are important, you should also think about renewal if you are looking to innovate. Invest in training so that your human resource can implement new technologies, look for collaborators who propose ideas and are capable of pointing out errors, and make sure that some of them are of the age of your clients, so that they give you insights.

The most important thing is that you are aware that you need to be flexible and constantly renew yourself. Allow yourself and your team to make mistakes during this process, because to continue generating successful ideas you must make mistakes, learn from them and create value through the generations.

If you want to delve into the subject, you can watch the free webinar 5 ways to innovate in your family business, by the expert Francisco Pérez.

This article was originally published in the INCAE blog in the newspaper La República.

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