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10 NEWS 21.9.2023 Striking the right balance between family dynamics and business operations can be challenging. Personal conflicts can spill over into the business, affecting decision- making and overall performance Simon Schembri & Philip Mifsud Simon Schembri is a Partner and Philip Mifsud is a Senior Associate within the Corporate Department of Ganado Advocates. Family business in Malta - the way forward (Part 1) F amily businesses have long been the backbone of Malta's economy, with a number of them dating back generations. is tradition of entrepreneurship has not only contributed significantly to the country's economic growth but has also played a pivotal role in preserving Malta's cultural her- itage. These businesses often merge modern business prac- tices with traditional values, creating a unique blend of in- novation and stability. We associate family busi- nesses with strong bonds and shared values which are a powerful driver for busi- ness success; flexibility and adaptability in the operation of the business which are es- sential for survival in today's ever-changing world; and loy- alty and trust which lead to enduring customer relation- ships and a motivated work- force. Running and managing a family business though, has its own challenges. Striking the right balance between family dynamics and business operations can be challeng- ing. Personal conflicts can spill over into the business, affecting decision-making and overall performance. Equally arduous is planning for the transition of leader- ship and ownership to the next generation. Clear succes- sion plans and open commu- nication are crucial to ensure a smooth handover. Businesses are generally faced with what is known as the "third generation rule" - the majority of businesses face difficulties in maintaining success by the time the busi- ness reaches the third gener- ation for a variety of reasons. To overcome the pitfalls asso- ciated with the third general rule, family businesses should seek to begin succession plan- ning as early as possible. One of the most compel- ling reasons for early succes- sion planning is to ensure a smooth transition. Succession is not just about transferring ownership; it in- volves passing on institutional knowledge, relationships, and the values that have made the business successful. By start- ing early, family businesses can take the time to identify and groom the next generation of leaders, allowing for a grad- ual and seamless handover. This is not a one-time event; it's an organic process that constantly evolves and re- quires all persons involved to participate to ensure that the skills and capabilities of fu- ture leaders are properly de- veloped. Starting early gives the next generation the opportunity to gain the necessary experience, education, and training to ex- cel in their roles. It also allows for mentoring and coaching to help them grow into effec- tive leaders. Succession planning is not just about selecting a succes- sor; it's also about identifying potential risks and developing strategies to mitigate them. These risks can include dis- putes among family members, tax implications, and finan- cial challenges. Early planning allows for the development of contingency plans to address these issues and reduce potential disrup- tions to the business. Planning for succession at an early stage would safe- guard the continued existence of family businesses for gen- erations to come, preserving their legacy and contributing to Malta's economic prosper- ity. In next week's BusinessTo- day, Part 2 of this article will focus on the need of family businesses to professionalise their operations and strength- en their governance as they evolve.

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