You’ve worked hard to make a success of your family business and to build your family’s wealth. The last thing you wish to see is the wealth built up over your lifetime squandered away by the next generation. That’s where financial stewardship comes in…
As discussed in The 3 defining traits of Blue Ocean leaders, Blue Ocean leadership is a leadership model devised by W. Chan Kim and Renée Mauborgane of INSEAD that promotes key traits for effective business leadership, the three primary traits being focusing on actions and activities, acting in close accordance with market realities, and disseminating leadership across all management levels. With these goals explained, Kim and Mauborgane then offer a four-pronged approach for actually implementing such leadership:
The working assumption of KPMG Global Family Business Survey is that natural affinities are drawing, or should draw family businesses closer and closer to high net worth individuals when it comes to raising the funds needed for their growth. This is premised on clearly established limitations of other sources of growth capital, in particular inconsistent investment horizons, unrealistic risk/return expectations or frustrating control tendencies.
In the past, succession in the family business was very patriarchal, with the entrepreneurial founder expecting his children to succeed him in the family business. There was little discussion of alternative careers, particularly for the older sons. The induction into the business was made through an apprenticeship model, in which the preparation of the next generation was based on observation of and direct learning from their father.
While entrepreneurs build up their empire, they think of growth and success and often forget that one day they may need to disconnect from and get their money back. That’s why every entrepreneur needs an exit strategy. Simply defined, it’s a method for getting out of an investment you’ve made in the past – in other words, getting out the money you put in (and then some).
In today’s market environment every business potentially faces challenges, or risks. Whilst risks are becoming more complex, the ability to manage and mitigate them is a necessity for the company’s success. Whilst business risks can never be entirely eliminated, being aware of what these risks are and where they come from can help you better manage them if they occur.
As pointed out by Christophe Bernard in his column on 18 October 2014, some 42% of the respondents to the Family Business Global Survey have, at some point in their business, received direct investment from high net worth individuals (HNWI) and other family business investment pools. The experience was commended by an overwhelming majority (92%) who saw it as positive, in particular when comparing that source of financing to others available to them.
Blue Ocean Leadership is an innovative take on leadership developed by INSEAD professors W. Chan Kim and Renée Mauborgane out of their Blue Ocean concept, which was shared with the public in 2005 in their book Blue Ocean Strategy and has proved a huge success. According to the two scholars Blue Ocean leaders are those managers who make a high impact – who actually manage to draw out the best in employees.
While many banks around the world are retrenching, it would appear that in India, at least, family businesses still see them as their chief source of funding. Indeed, nine out of 10 Indian respondents in this year’s Global Family Business Survey were upbeat about bank financing.
Relations between family businesses and HNWIs in South Africa are exceptionally strong, according to our 2014 Global Family Business Survey. In fact, four out of five family businesses canvassed reported having already obtained direct investment from HNWIs – and all of them were positive about the experience. “They were easily approachable and their guidance throughout the undertaking was outstanding,” said the CEO of a Stellenbosch-based investment company.
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