Stages of Family Businesses and Types of Family Councils

Abstract

A business that was started twelve years ago by a thirty-eight-year-old entrepreneur with children who are now seventeen, thirteen, and ten does not need the same family business governance forum as a third-generation business family with thirty-five shareholders in two generations who do not work in the business. While the entrepreneur might use a family meeting to hold discussions about the parents’ expectations of the children, the third-generation business family might discuss the issue of how the second generation will be asked to participate in teaching values and business history to the fourth-generation teenagers. Since business families vary greatly in size and configuration, we need a way of categorizing them. Family businesses are often classified as (1) first generation or founder firms, (2) sibling ownership or partnership, or (3) family dynasty or cousin consortium.¹ These classifications serve us well for identifying the predictable issues arising in each stage. Also, for a complete discussion of the challenges faced by founders, siblings and cousin transitions, please see the notes at the end of the book.²