The Generational Divide, Part 2: Is a management company the right solution for your family business?

In an earlier post on family business, The Generational Divide: Running a Family Business, I introduced the topic of transitioning a family business across generations. One of the key points I emphasized was the importance of running your family business not just out of obligation but because it is aligned with your interests. You’d be surprised how much passion and interest affect your ability to perform. What I left out though, was a potential solution for those who find this motivation to be lacking. Not having an interest in your family’s business does not mean that your only option is to abandon participating in it altogether.

Another alternative many businesses are now pursuing is hiring a management company to oversee the day to day operations of the business. How far this applies to your business depends on its size and your industry focus. For a fee, management companies take care of the details (i.e. the day to day management of the business), while you focus on the big picture and potentially other areas of interest to you. The details of the ownership stakes and profit sharing varies across businesses.  One of the pitfalls though, is that from the perspective of your clients , your business may switch  from a more "personal" feel to a  “big company” feel. Additionally it is essential to constantly evaluate the performance of the management company and ensure that the proper incentives have been set-up to ensure a successful relationship. Has your family business chosen this route? Share your experiences with us!

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