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  1. Chapter 2 Family Business Opportunities • Small Business Management, 11th edition • Longenecker, Moore, and Petty • 2000 • South-Western College Publishing 2-1

  2. What is a family business? • Two or more family members are involved – involvement may vary: • Several family members work in the business • Ownership has passed to a second or third generation • Children are being groomed for leadership

  3. The Overlap of Family Concerns and Business Interests Business Concerns Family Concerns • Nurturing • Development • Profitability • Survival • Small Business Management, 11th edition • Longenecker, Moore, and Petty • 2000 • South-Western College Publishing 2-3

  4. Advantages of Family Involvement • Strength of family relationships • Willingness of family members to make sacrifices for the good of the firm • Demonstration of high levels of concern for employees • Ability to plan for the long haul • Emphasis on quality and value • Small Business Management, 11th edition • Longenecker, Moore, and Petty • 2000 • South-Western College Publishing 2-4

  5. Culture • Culture: unwritten, customary ways of doing things; shared beliefs • Organizational Culture: practices distinguishing a given firm. (working late)

  6. Negatives Stress – emotional/financial Dividing personal & business duties Power struggle Lack of personal time Positives Trust Loyalty/Commitment Compatibility Family Roles in Business

  7. Parental Concerns About Passing the Business On to the Next Generation • Does my child possess the temperament and ability necessary for business leadership? • How can I motivate my child to take an interest in the business? • What type of education and expertise will be most helpful in preparing my child for leadership? • What timetable should I follow in employing and promoting my child? • How can I avoid favoritism in managing and developing my child? • How can I prevent the business relationship from damaging the parent child relationship? • Small Business Management, 11th edition • Longenecker, Moore, and Petty • 2000 • South-Western College Publishing 2-6

  8. Key Concepts in Family Business Management 1. Create a flexible, creative organization 2. Require competence in family members. 3. Prepare successors for leadership. 4. Attract and retain excellent managers.(family/non-family) 5. Discuss plans openly. 6. Avoid favoritism in personnel decisions. 7. Exploit unique advantages of family ownership. • Small Business Management, 11th edition • Longenecker, Moore, and Petty • 2000 • South-Western College Publishing 2-9

  9. A Model of Succession in a Family Business Stage I Pre-Business Child becomes aware of some facets of firm and/or industry. Orientation of child by family member is informal. Stage III Introductory Functional Child works as part-time employee. Work gradually becomes more difficult. Includes education and sometimes work for other firms. Stage II Introductory Child is exposed to business jargon, employees in the business, and the business environment. Entry of Successor Stage V Advanced Functional Potential successor assumes managerial position. Includes all management positions prior to becoming president. Stage IV Functional Potential successor begins work as full-time employee. Includes all nonmanagerial positions. Transfer of Leadership Stage VI Early Succession Successor assumes presidency. Includes period in which successor becomes de jure head of company. Stage VII Mature Succession Successor becomes de facto head of company. • Small Business Management, 11th edition • Longenecker, Moore, and Petty • 2000 • South-Western College Publishing 2-11