Entrepreneurship is an important ingredient for successful, multi-generational family business, because it drives balanced risk taking. Importantly, the taking of reasonable risk is required for family businesses to project themselves into the future (and we would contend, requiring an appropriate strategic planning framework to help guide all family members). It is not easy, as it requires a broad skill set across strategy setting, financial risk frameworks, sustained attitude of individual counselling and development, supportive yet objective feedback loops, effective understanding of business foundations, and a well-articulated entrepreneurial risk culture. There are many interdependencies, but families with businesses that can openly and deliberately embrace this have the ability to prosper into future generations.

It is common that successful family businesses place the founder’s feats and successes on an elevated pedestal. The stories abound with the successes and triumphs, often with the passage of time reach mythical status. Success over time though, is also normally couched in failures, mistakes and hard-won lessons which successful founders learn and adapt from. Celebrating a successful journey is of course important, but understanding and learning the entrepreneurial values that get you to arrive at effective understanding is critical to family business success and its continuity. These values and attributes cover determination, drive, balanced risk assessment, encouraging open communication of good and bad news, implementation excellence and measured/blame free trial-and-error.

Cameron Harrison operates a fifteen-factor framework to help assist families in business. Five of the advice factors in the framework inter-relate to how families with businesses can consider and potentially address entrepreneurship in the next generations. It is part of the course that family members may want to do something new, different or tangential to the family’s long-standing business.

1. The best help is considered, consistent counsel
A default action of senior family members is often to provide financial assistance to the ‘budding’ proposition. A suggestion is to have the idea or concept tested with independent advice, and planning is a great means to do this. It helps to untangle the ‘spaghetti bowl’ that is an idea, into the salient and key elements of the proposition. The need for capital will likely be a critical issue, but there will invariably be six to eight other critical factors that also need to be addressed.

The world and your environment are constantly changing, and for new business propositions, change seems exponential. The significant ‘gift’ of planning is that it instils a habit and culture in the entrepreneur to regularly and critically assess what they are doing, the environment they are doing it in…and whether their strategy remains valid.

2. Let them be the entrepreneur
There is a very big difference between “You need to think about…” and, “Have you thought about…”. Micromanaging from the sidelines is rarely helpful. What would help is choice topics discussion, informed from the senior members of the family business.

Areas that younger members of the family may not have been exposed to such as dealing with crisis, product and path to market, the role of assumptions and constantly reviewing them, the role of business ‘hygiene’ in ensuring a sound foundation, managing people to their strengths, crucial conversations and so on. These are areas or topics of wisdom and gravitas gained through experience. Quietly raising these topics to family members who are interested in business early is invaluable to encourage thinking and good habits ‘down the road’.

3. It can be lonely. Seek independent advice
The entrepreneurial journey can be lonely. Studies have shown the value of determination and drive in business success, but with that can come isolation. Having core, independent advice on strategy, finance and legal helps to provide the ‘sounding board’ to test ideas, address problems and evaluate assumptions. Circulating thoughts in just your own ‘fish bowl of thoughts’ can result in both unintended biases and a deficiency in rigorous, independent thought and analysis of ideas and concepts.

4. Family funding framework
Families and family businesses are well served by having clear policies and frameworks for supporting and funding other active businesses led by family members. It helps family members have a clear governance understanding of how the family would like to deal with entrepreneurial endeavours. This will consider access to funding, the family’s risk allocation approach, involvement of the family, asset protection and intergenerational wealth transfer implications.

5. Allocate capital relative to risk
Entrepreneurialism should not be confused with great leaps or sharp tangents. At its best, it is a well-thought-out approach with a culture, to examine opportunities.

Family business success is invariably a function of measured, balanced risk decisions and steps into the future. Capital is best to be allocated relative to a balance of risk framework. This supports entrepreneurship and risk taking. By understanding and applying this, families help to create a supportive but careful and analytical approach.

As families with businesses and significant wealth address thinking - these issues, which are by no means exhaustive - they achieve the major first necessary step – creating a supportive culture for entrepreneurship within the family. It then is a matter of delivering and executing on the frameworks with long term purpose and diligence.