Phases of Ownership

There are 3 prominent stages of development in a Family Business

  • Founder or Owner stage
  • Siblings Partnership stage
  • Cousin Consortium stage

A typical family business goes through these three stages, each having its own strengths and challenges. A thorough in-depth understanding of each stage would be mandatory for the long term prospects of the enterprise.

Phase 1

At the Founder / owner stage one and maybe two people (Owner / Founder's spouse) manage the business. The business is typically small but growing and holds an important place in the family scenario. The intense involvement of the family in business activities enables quick, effective and spontaneous decision making. The Founder plays a significant role in the business and is often considered indispensable as this stage could continue for several decades.

Phase 2

Family business then moves to the Sibling Partnership stage when ownership control in business passes onto the sons and daughters of the Founder / Owner. Business has grown bigger and diverse; the issues are complex. The business is in the hands of siblings, who may or may not be connected, thus providing leverage for tension and misunderstanding. The issue at this stage would circulate around sharing power, authority, planning succession, professionalizing the family business, creation of family wealth etc.

Phase 3

The next stage of transition in family business is the Cousin Consortium stage when the ownership passes on to a group of cousins. The Family has grown larger and the business much bigger and more complex. Several non family members join the business and some cousins hold simply a board role. This phase will require the family to collectively resolve issues relating to family unity, managing differences, redefining values, impact of wealth on different branches of the family.

If the family is able to plan the strategy to overcome the issues that arise in these crucial stages, the business will survive and sustain beneficially for the future generations.

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