All right, today we're talking about the five challenges, five challenges that business owners face when they are family businesses. Family businesses face these five challenges. This information, these five challenges came from you, came from the people that I listen to, that I work with most closely, my clients.

I also surveyed other business people who are working with family offices and family businesses. Most of you know, I do a lot of speaking with Vistage. I reached out to a handful of Vistage shares, and I said, the family businesses that you work with, ask them what their challenges are.

And these are the five they came up with. Number one is succession planning. In a family business, you have one person usually who's in charge.

Sometimes it's the matriarch or the patriarch. Then you have kids that are working in the business, cousins, sometimes nieces and nephews working in the business. And because the family dynamic, it can be difficult to pick and choose who the next is in line in the family business.

This is called succession planning. Now, each aspect of the business should have a succession plan. You should decide who's going to be the sales leader and then who's next in line in sales, who's going to be the operations leader, who's next in line in operations, who's going to be the finance leader, who's next in line in finance.

There should be a succession plan in all of these areas. There also should be a succession plan for the person who's the CEO. If you don't have that, it's a challenge for you in your business.

So family businesses tend to mix the family dynamic with the business dynamic, and it makes succession planning difficult. The solution, bring in someone from the outside, either a business strategy consultant or a human resource consultant or an industrial organizational psychologist, create formal structure, requirements, job descriptions for each role in the line of succession in the business, and then make sure that every person in the family who's going to go into the line of succession completes the requirements and fulfills the job descriptions for the role that they're sending to. Formalize the structure in the business as best you can.

This will make it much easier for succession planning purposes. I've found with family businesses, just having the conversation will start the process. It makes it much easier once the ice is broken.

Otherwise, you've got the kids wondering, well, if dad steps down, who's next in line? There's a whole TV show that was on HBO, very well done TV show named Succession about a family business that was huge, that had all these challenges as well. So succession planning is number one, formalize the process to get it out of the way. Number two, family conflicts and governance.

So how the business is run currently, succession is about who's going to lead the business when the matriarch or patriarch moves on. Governance is about how the business is run on a day-to-day basis. You don't want boardroom conflicts becoming kitchen table conflicts.

So have a clear way to separate personal from business when you're having these discussions. I know it's hard because you're a human being. You're only one person, can't separate yourself, but you got to do the best you can to try and separate the business governance from your family dynamic, create a clear structure for how business decisions are made, what a process looks like for formalizing business decisions, and keep those separate from the family dynamic at all costs.

The third challenge for family businesses is professionalizing the business. So scaling requires systems and processes and practices. And one of the things that we're brought in to do all the time is create standard operating procedures and structures and processes for the business.

Why do people bring us in for that? It makes the business more valuable. The business is worth more if there are standard operating procedures, plus the business is easier to run. And in the event that people are missing, leaders are missing, there are systems and processes to follow to run and manage the day-to-day operation of the business.

We find this is completely missing from a lot of family businesses. So the best thing you can do to professionalize your business is put standards, systems, and processes in place. If you don't know how to set those up in your business, you can bring a consultant like us in.

We can give you a template and get you started in the process, and then you can create your own team within the business to do this. I promise you, it will add significant value to your business overall. When you go to sell your business, it'll be worth more if you do this.

So professionalizing the business is the third challenge that business owners face. The fourth challenge that business owners face is wealth transition and estate planning. Family businesses, you do well and you're successful.

What happens to the money? Managing your wealth when you're successful as a family business becomes a completely and totally separate function that should be done by professionals. That's why most family businesses that are successful create what's called a family office. The family office manages the finances and the wealth that the family has accumulated.

It serves as a clearinghouse, it serves as a sounding board, and also it keeps people away from the family when they're trying to pitch their ideas to them. Successful family businesses are vulnerable to scam artists, and they're vulnerable to other family and friends who want them to invest in ideas. No matter how well-intentioned, those ideas most of the time are not going to be successful.

So creating a family office will not only manage your wealth, it will distribute your wealth for you in a manner that you want. It will also keep at arm's length anyone who's trying to scam you or trying to get your money from you for whatever reason. So wealth transition and estate planning is the fourth element.

The fifth challenge that family businesses face is balancing legacy with innovation. Your family business is successful because of you and because of your family's reputation. You want to maintain that, but you also need to innovate faster than people can imitate.

You're running a family business, but you're competing with privately held businesses that are really aggressive. You may even be competing with publicly held businesses that are really aggressive. You need to continuously innovate.

You need to bring in top talent to help you grow, but you want to maintain your family's legacy. How do you balance both of these? You do it by always staying cutting edge, by being involved in industry trade associations, by incorporating into your leadership team people from outside the family to bring fresh ideas and to look at things with fresh eyes while maintaining the structure that the family has had for centuries in some cases or decades in others, and making sure that the legacy that the family has created is always well respected. Here's the thing.

Family businesses are the bedrock of our entrepreneurial system. Just about every business starts as a mom and pop business, or 80% of successful businesses start as a mom and pop business. Eventually, they grow beyond that, and their capability to grow is only hampered, only hindered by the willingness for the leadership of the family business to adjust and adapt and grow with the times.

If these things are important to you, go to getinsidebs.com. Opt in for our daily, daily email newsletter. Once a month, we send out an invitation for people to join us at our family business Zoom meeting. Twice a year, we hold a family business conference in person.

If you want invitations, you got to be on the list, and the only way to get on the list is getinsidebs.com. I'm Dave Lorenzo. I'm here on LinkedIn every day at 11 a.m. I'm also available on the podcast at 6 a.m. wherever you get your podcasts. The name of the show is The Inside BS Show.

You can also get it by opting in at the link below, getinsidebs.com. Thanks for joining me today. We'll see you right back here again tomorrow. Until then, here's hoping you make a great living and live a great life.