Family businesses have many unique competitive advantages and constraints – but how are these best leveraged? Here, we discuss how to lean into your “familiness” advantage to better compete in the marketplace, whether the competition comes from a local business, a box store, or internationally.

As a family business, it is important to honestly reflect and properly identify the “F” factors: distinct advantages and constraints that result from the uniqueness of your family.

“F” factors that can generate your familial advantages (or create constraints) in the marketplace include:

• Patient capital (long-term outlook)
• Leadership's effective decision-making
• Reputation and trust (e.g., brand name)
• Strategic alliances
• Succession strategy

Utilize humility in your mapping of familial advantages vs. constraints.

Identifying “familiness” advantages and constraints will help determine which resources to focus on nurturing, which to add and acquire, and which to shed.

Family ownership creates both advantages and constraints. Families need to openly acknowledge and address them, particularly in light of the business’s current state and strategic end goal for the family. A clear vision and open communication will inform resource allocation and addition for current and future leadership, as well as resource removal and replacement for those that do not align with the long-term objective. Finding this alignment may be easier said than done, as our third annual Private Business Owner Survey found that there was mixed alignment on ownership strategy among private business owners surveyed, with just 59% saying they were very well aligned.

How well aligned is your present ownership group on its ownership strategy?

Understanding and appropriately addressing constraints on the business is equally important. Constraints could include difficulty shedding longstanding practices or resources or unintentionally falling into patterns that are counter to the business’s desired strategic direction. Surrounding yourself with trusted advisors and respected peers will also better inform you on best practices (and how to avoid common pitfalls).

Succession planning is a key strategic resource issue, both from the perspectives of ownership and management.

As private business owners look to the future, succession planning emerges as a critical factor in preserving both the legacy and longevity of their enterprises. While many owners aspire to pass their businesses to the next generation, the strategies they consider – and the challenges they face – are as diverse as the families and businesses themselves.

In our Private Business Owner Survey, 62% of private business owners said they planned to transition ownership of their business to the next generation, yet just 23% had a formal succession plan for key executives that was fully documented and implemented.

Does your business have a formal succession plan for key executives?

When planning, ask yourself:

• How effective is your leadership team at identifying the unique resources and capabilities embodied in the senior generations?
• What new or additional capabilities in future leaders will be required for continued success?

Identifying family and nonfamily leaders who the transition will affect and engaging them in planning is mission-critical for long-term success.

Complementing legacy capabilities with additional resources is key in strategizing next generation development. Collaboration with your successors in this respect will ensure smooth implementation and long-term success, both in terms of financial return and the legacy of your family and business.