This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Are Family-Owned Businesses Threatened With Extinction?

By Hal M. Bundrick

NEW YORK ( MainStreet)--America's mom-and-pop shops are key drivers of the U.S. economy. Many grow from kitchen counter enterprises to brick-and-mortar behemoths. But more than a quarter don't have a board of directors and nearly half haven't prepared contingency plans to cover the loss of a leader.

This lack of succession planning threatens the long-term success and competitiveness of family firms, according to the findings of a recent Deloitte survey, Perspectives on Family-Owned Businesses; Governance and Succession Planning.

"Family-owned businesses are a huge component of the U.S. economy, and their attention to good governance practices can have an impact on success and failure," says Tom McGee, national managing partner of Deloitte Growth Enterprise Services, Deloitte LLP. "Tapping into the insights and experiences of an engaged, diverse, and independent board can yield significant operational advantages in the long run. Given that these companies are considered engines of job creation, a sharper focus on governance is important to their longevity, and to the success of our economy as a whole."

McGee says that it's not enough simply to have a board of directors lending objective advice and consistency of vision over a family business's lifetime. The composition of that board is important, as well. "Members of the board must reflect the changing demographics of the world we live in," he says. "They should be expected to bring rich and varied expertise and backgrounds to the role, and also be held accountable for their success in guiding the company's growth and future."

Perhaps the biggest threat to the generational success of a family firm is the failure to plan ahead for the transition of the business to heirs or buyers. According to the Deloitte survey, close to half (49%) of respondents say they only review succession plans when a change in management requires it.

"Many family-owned businesses struggle to maintain their family-owned status past the second generation," adds McGee. "And while succession planning can be an uncomfortable topic for owners, especially founders, it is critical to the success of an enterprise. By creating a stronger governance and succession strategy, a family-owned business is much more likely to preserve the founder's long-term vision for generations to come."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs