Can an entrepreneurial family business thrive across generations? Absolutely!
We often hear about wealth passing down through generations, but sustaining a family business is about more than just inheritance. While some families have successfully navigated this journey, others face challenges, wondering if the next generation is ready, willing, or even interested in taking over. Many founders express a desire to involve their children but struggle to find the time or direction to start the transition effectively.
Lessons from Legacy Businesses
Families that have built enduring businesses, avoiding the all-too-common “shirtsleeves to shirtsleeves in three generations” pitfall, tend to balance tradition with adaptability. Here are some businesses that have stood the test of time:
Kongo Gumi (Japan, est. 578): A construction firm that remained family-run for over 1,400 years before being sold in 2006.
The Nishiyama Keiunkan (Japan, est. 705): A hot springs hotel operated by 52 generations until 2017.
The Marinelli Family (Italy, est. ~1339): Producing bells for centuries, now led by the 26th generation.
The Antinori Family (Italy, est. 1385): Crafting Tuscan wines for over 600 years.
Who’s Involved in a Family Business?
When thinking about a family business, it’s not just about passing control from one generation to the next. Multiple stakeholders play a role, including:
Family members who aren’t involved in the business
External investors
Executives and employees
Non-working family shareholders
Non-family owner-managers
Family members employed in the business
Family members who both work in and own the business
Given these complexities, ownership and governance decisions should be made before the next generation takes over. Whether through formal meetings or casual dinner conversations, families should define policies that clarify expectations and address potential conflicts between family and business interests.
Key Areas for Family Business Governance
1. Succession & Wealth Transfer Policies
Is the business a financial asset ('value out' - to be sold for market returns) or a long-term legacy ('custodial' - meant to be preserved for future generations and stakeholders)?
Ownership considerations:
Should ownership remain within the bloodline, or include spouses/partners? While inclusion fosters security and family unity, it also risks dilution of ownership and complications in cases of divorce.
Should only active family members hold ownership stakes, or can non-working family members be shareholders? Restricting ownership may prevent conflicts but could also limit career flexibility and alienate family members.
2. Employment & Compensation Policies
Balancing family involvement and professional management is crucial. Some key questions to consider:
Who is eligible for jobs within the business?
What positions are available, and should family members start from entry-level roles?
How should family members be evaluated in hiring, performance reviews, and disciplinary actions?
How can non-family members develop their careers, if family comes first?
Should compensation for family members be structured with lower salaries (because “one day this will all be yours” and potential balance with dividend payments) or higher salaries (as an incentive for family loyalty)?
3. Dividend Policy
Striking a balance between reinvesting profits and rewarding shareholders is essential. Should dividends be guaranteed regardless of business performance, or should reinvestment take priority to ensure long-term stability?
This also ties back to the 'value out' vs. 'custodial' debate. If ownership is seen as a financial asset, shareholders will expect dividends even in lean years. If it’s viewed as a legacy, reinvestment and financial reserves take precedence.
4. Management, Control & Oversight
Even if there’s a traditional leadership structure, family owners often want a say in critical business decisions. Key areas where family control may be retained include:
Financial decisions (e.g., change of board directors, approving major expenditures, handling debt).
Reputation management (e.g., branding decisions, use of the family name, business closures, layoffs).
By setting clear policies, families can foster open discussions, reduce conflicts, and create a transparent roadmap for those who want to be involved—and those who don’t.
How Fiduchi Can Help
At Fiduchi, we specialise in helping family businesses navigate these complex transitions. As an independent, owner-managed fiduciary services firm, our experienced board can guide families in shaping governance structures tailored to their unique needs.
We’re seeing more businesses opt for trusts or foundation structures to ensure a smooth transition across generations. These structures provide a clear framework for ownership and governance, reducing uncertainty and ensuring that the founder’s vision is carried forward - without relying solely on the next generation’s interpretation.
If your family business is considering its long-term future, let’s start the conversation. The right planning today can secure your legacy for generations to come.
For more information, or to discuss how Fiduchi can assist you, please contact Heidi Thompson, Graham Marsh TEP or David Hopkins.