The Top Mistakes That Business Consulting Can Help Family-Owned Businesses Fix

By Ahmie Baum, CFP® CFBA

Family-owned businesses drive the U.S. economy, employing 60% of the nation’s workforce. These businesses face unique challenges due to their blend of family, business, and ownership dynamics. Our services can provide the external expertise and perspective needed to navigate these complexities effectively. Here are some of the top mistakes that we help family-owned businesses fix:

Family-owned businesses that struggle or fail often experience similar challenges, including:

• Lack of Formal Financial Planning and Analysis 
• Failing to plan for succession
• Insufficient Separation Between Family and Business Finances 
• Building a Governance Structure
• Resistance to External Advice and Innovation
• Inefficient Capital Structure and Financing
• Mixing family and business issues 

These are among the top issues leaders of family-owned businesses have to address.

Lack of Formal Financial Planning and Analysis 

Many family businesses operate without formal financial plans or analyses, relying instead on informal methods and personal relationships. This approach can lead to suboptimal decision-making and missed opportunities. We introduce formal financial planning and analysis processes, including budgeting, forecasting, and financial modeling, to help businesses make informed decisions and plan for the future more effectively.

Decide Who Should Run the Business After the Founder

If you’ve been putting off succession planning to run your business or avoid raising issues of capability, interest, and fairness among family members, don’t put it off any longer. Your company may be successful today, but not knowing who should take over—and when—could lead to its demise once you’re no longer in charge. You started your business because you have certain skills. You must make it a point to pass on those skills to your loved ones for them to grow in their positions. Recognizing and developing professional skills can help you identify who is best suited to run the business in the future—or whether handing it off to someone outside the family is wiser.

Interchange Capital Partners can provide a road map for transitioning control of your business in a way that’s acceptable to everyone. while also addressing potential tax implications and estate planning considerations.

Insufficient Separation Between Family and Business Finances

Blurring the lines between family and business finances can lead to financial mismanagement and conflicts of interest.

Interchange Capital Partners can help establish clear boundaries and governance structures to separate family and business finances, including setting up appropriate financial controls and accountability mechanisms.

Building a Governance Structure

Without effective governance structures, family businesses may struggle with decision-making, conflict resolution, and strategic planning. It’s your family, but inside the company, there must be clear guidance on roles and responsibilities, how decisions and disputes are handled, and how input from individual family members gets funneled into the company. Without governance, many family businesses struggle, leading to inefficiency, conflict, and, ultimately, failure.

Interchange Capital Partners can design an agile and transparent governance structure for your unique needs, assisting in developing or enhancing governance structures, such as family councils or boards of directors, to improve decision-making processes and ensure that the business operates in the best interest of all stakeholders.

Resistance to External Advice and Innovation

Family-owned businesses may resist change and external advice, preferring to rely on traditional methods and internal expertise.

Interchange Capital Partners can bring fresh perspectives and best practices from outside the family business realm, helping these businesses innovate and adapt to changing market conditions.

Inefficient Capital Structure and Financing

Family-owned businesses might not optimize their capital structure or explore all available financing options, potentially limiting growth and profitability.

Interchange Capital Partners can analyze the business’s capital structure and financing needs, advising on strategies to secure funding and optimize appropriate financial leverage.

Separating Your Business Life From Your Family Life

No family is without conflicts. Too often, though, families let their issues spill out of the household and into the office. This disharmony hurts the family and can damage the company’s productivity. Your family also might lack the skills for the conversations needed to drive innovation and build your business

Interchange Capital Partners helps foster long-term understanding and collaboration through a conflict-resolution process and our Clarity Foundation™ that helps everyone navigate the four interchanges of the individual, the family, the business, and the ownership. The goal is to understand how each family member fits in and learns to work together better. This can turn seemingly insurmountable obstacles into golden opportunities.

Find a Reliable Business Consulting Firm

Interchange Capital Partners as a Family Business Advisory Firm can play a pivotal role in addressing and rectifying the common mistakes encountered by family-owned businesses.

By leveraging internal and external expertise, Interchange Capital Partners can enhance family-owned businesses’ financial planning, governance, risk management, and overall strategic direction, ensuring long-term sustainability and success.

If not corrected, mistakes like the ones highlighted here can cast a shadow over your family-owned company. Luckily, with the right guidance and support, they don’t have to. Let us show you how our focus on family-owned businesses can help you realize the outcomes you want from your business and family.

If you’re looking for a personal, trusting partnership, please take advantage of our Second Opinion Service. Email us at team@interchangecp.com or call our office at 412-307-4230 to schedule an introductory appointment.

About Ahmie

Ahmie E. Baum is the CEO and Founder of Interchange Capital Partners. Using a collaborative and comprehensive process developed over 43 years of working with Wall Street banks and financial services firms on behalf of families.

Interchange Capital Partners provides family office and transition strategy services for family businesses, helping families protect and grow their family capital with clarity, understanding, and action by being relevant and resourceful around their unique circumstances.

As a graduate of the University of Pittsburgh, Ahmie began his career with EF Hutton in 1979 and transitioned to UBS in 1993. Ahmie is a CERTIFIED FINANCIAL PLANNER™ (CFP®), received the Executive Certificate in Financial Planning from Duquesne University School of Leadership and Professional Advancement, and has a Certificate in Family Business Advising (CFBA) from the Family Firm Institute. He also has Certificates from The Growth Institute around Growing and Scaling Business and Cash Management. For the past 20 years, he has been involved with Strategic Coach, an international entrepreneurial training program.

When he’s not working, Ahmie enjoys spending time with his wife, Sara, their three children, and their granddaughters. He recognizes that health is wealth so he has committed to daily yoga, meditation, and plant-based eating. His other hobbies include woodturning, golf, reading, listening to music, and biking. He is active in his community and served as the Foundation Chair of the Jewish Federation Community Foundation of Greater Pittsburgh and supports various philanthropic endeavors. To learn more about Ahmie, connect with him on LinkedIn. 

Interchange Capital Partners, LLC, (“INTERCHANGE CAPITAL PARTNERS”) is a registered investment adviser with the Securities and Exchange Commission providing investment advisory and financial planning services. Any reference to the terms “registered investment adviser” or “registered” does not imply that INTERCHANGE CAPITAL PARTNERS or any person associated with INTERCHANGE CAPITAL PARTNERS has achieved a certain level of skill or training. A copy of INTERCHANGE CAPITAL PARTNERS’s current written disclosure (ADV 2A Firm Brochure) discussing our advisory services and fees is available for your review upon request. INTERCHANGE CAPITAL PARTNERS, in addition to providing investment advisory and financial planning services, provides business consulting services. In connection with its business consulting services, INTERCHANGE CAPITAL PARTNERS does not provide tax or legal advice.

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