Seven Strategies for Creating an Entrepreneurial Culture
It is the fate of almost every fourth-to-sixth generation family: the wealth dissipates as the family grows, unless their culture goes beyond wealth preservation to encourage wealth creation. That means taking informed risks (emphasis on informed). If some portion of the diversified asset pool is directed toward entrepreneurial endeavors, experience and insight are as important as investment dollars if you want to ensure the family’s money is well spent.
Families who understand the value of informed risk-taking and entrepreneurial pursuits often invest in a formal training process that teaches family members how to evaluate opportunities and develop structured business plans for launching and maintaining new ventures. These families are willing to embrace experimentation, uncertainty, and the possibility of failure. They openly discuss their successes and failures and appreciate the lessons that failures teach. Some 20% of legacy families formalize a private equity venture business to support entrepreneurial endeavors and to provide experience for future owners of larger businesses.
Families who do this well create a culture that balances caution with encouragement and pushes family members to pursue their passions in a rational manner. Below are seven strategies for fostering an entrepreneurial culture*:
- Encourage the pursuit of a meaningful, productive, and fulfilling life for each owner.
- Define an entrepreneurial culture for the family.
- Separate the sleep-well assets from the risk-taking assets (the “stay-rich” from the “get-rich” activities).
- Put the family business assets in the hands of owners and managers who are informed risk takers.
- Regenerate family assets every 50 years; there is no standing still.
- Define responsible ownership for each generation based on the challenges at hand.
- Use the family’s most creative strategies in mission-driven philanthropic ventures.
What does your family do to help cultivate a balance of entrepreneurial spirit and prudent risk management in the next generation?
*Adapted from Family Legacy and Leadership: Preserving True Family Wealth in Challenging Times, Sara Hamilton and Mark Daniell