Family business consultancy: guide and services.

TL;DR: Family businesses rarely fail because of the market — they usually fail from the inside: successions left unplanned, confusion between what belongs to the family and what belongs to the company, and decisions made over Sunday lunch instead of in a governance body. Family business consultancy brings order to those three planes — family, ownership and management — with concrete tools: a family protocol, a succession plan, professionalised management and governance bodies. Here I explain what each one solves, how I run this kind of engagement, what drives up the cost and when it makes sense to call in someone from outside.

Family business consultancy helps separate three planes that get tangled together in these companies — family, ownership and management — so that business decisions no longer depend on family dynamics. The outside consultant works on four fronts: the family protocol that sets the ground rules, succession planning, the professionalisation of management, and the creation of governance bodies. It isn't about imposing anything — it's about giving the family a neutral, agreed framework for making decisions.

I work with business families from an uncomfortable but useful position: the one who doesn't sit at the table at Christmas. In a family business everyone is right and everyone carries a wound, and that's why the underlying issues — who's in charge, who inherits, who gets paid what — get postponed for years until they explode at the worst possible moment. My job is to bring them to the table earlier, with a method, and without taking sides.

What a family business consultant does (quick answer)

If I had to sum up the engagement in five tasks, these would be them:

• Separate family, ownership and management. Naming the three roles each person blends together — family member, shareholder and employee — so they stop contaminating one another.
• Draft the family protocol. Agree in writing on the ground rules: who can join the company, how dividends are distributed, what happens if someone wants to sell their stake.
• Plan the succession. Order the generational handover with time, not when health problems or a falling-out force it to be improvised.
• Professionalise management. Make sure roles are filled on merit rather than surname, and that the founder can let go without the business grinding to a halt.
• Set up the governance bodies. Create the forums where each decision is made in the right place: the shareholders' meeting, the board of directors and the family council.

The rest of this article develops each of these fronts and how they are approached from the outside.

Why a family business needs an outside perspective

A family business has an enormous strength — commitment, long-term vision, shared values — and a structural weakness: it blends together three systems that in any other company are kept separate. Family runs on affection and loyalty; ownership runs on capital and distribution; the business runs on efficiency and results. When those three circles overlap, a promotion stops being a business decision and becomes a family message, and a disagreement between shareholders ends up as a personal argument.

The outside consultant isn't there to know the business better than the family — impossible, they built it — but to do what no family member can do without getting burned: ask the questions nobody asks, put on the table what everyone avoids, and propose rules that, coming from a sibling, would sound like a power play. That neutrality is half the value; the other half is the method — knowing where these situations tend to break down. If you want the general framework for when it makes sense to bring in outside help, I cover it in my article on when to hire a strategy consultant.

What a family protocol is and what it's for

The family protocol is the document that sets out the rules the family agrees on for relating to its business. It isn't an ordinary contract or a formality: it's the outcome of a conversation process in which the family decides, calmly and before conflict arises, how it wants things to work. Its greatest value isn't in the final document, but in the questions it forces the family to answer along the way.

What a family protocol includes

No two protocols are alike, but almost all of them cover the same issues:

• Entry and exit rules. What requirements a family member must meet to work in the company (education, prior experience elsewhere, a genuine vacancy) and how their departure is handled.
• Dividend policy. What share of profits is distributed and what share is reinvested, so ownership doesn't demand milking the business and management doesn't starve it.
• Transfer of shares. What happens if a shareholder wants to sell, whether there is a right of first refusal, and how the stake is valued.
• Succession and leadership. The principles that will guide the handover, even if the specific name is decided later.
• Conflict resolution. Which body or figure is turned to when there's disagreement, before it reaches the courts.

Does a family protocol have legal value?

It depends on how it is formalised. The protocol itself is a pact between family members: some of its clauses are moral commitments, while others can be elevated to company bylaws or shareholder agreements with binding effect. Deciding what stays as a gentleman's agreement and what is legally secured is one of the technical decisions in the process, and it should be taken with legal and commercial advice. Royal Decree 171/2007 also regulates the publicity of family protocols in the Commercial Registry (Registro Mercantil), for companies that want to give them visibility to third parties.

How succession is planned in a family business

Succession is the moment when most family businesses break down, and almost never for lack of talent in the next generation — it's for lack of planning. The handover gets postponed because it's uncomfortable — talking about succession means talking about the founder's retirement, and nobody wants to be the one to bring that up — until a health issue or a crisis forces it through unprepared.

Planning succession is a process that takes years, not a single notarial act. It typically involves training and testing the next generation in increasing responsibilities, defining the role the founder will play afterwards (retiring is not the same as disappearing), preparing the business to function without the person who used to decide everything, and organising the transfer of ownership. This last point also has an important tax dimension: transferring a family business qualifies for significant reductions in Inheritance and Gift Tax and for an exemption from Wealth Tax when certain requirements on shareholding, management role and remuneration are met — benefits that are lost precisely when succession is improvised.

When to start planning the handover

Earlier than seems reasonable. The practical rule I apply is simple: if the business would stop functioning should its main person in charge be unavailable tomorrow, succession is already overdue. There's no need to have decided the successor's name; what's needed is to prepare the business and the family so that, when the moment comes, the handover is an orderly process rather than an emergency. A good handover rests on a clear direction, which is why I usually work on it in parallel with a strategic plan that gives the next generation a horizon to work towards.

What professionalising management means

Professionalising doesn't mean pushing the family out and bringing in outside executives. It means running the business by business criteria: roles filled on merit rather than surname, clearly defined responsibilities, family members who work in the business paid at market rate and separately from what they earn as shareholders, and decisions that follow a process rather than the mood of the meeting.

Professionalisation often clashes with affection, and that's where the difficulty lies: it's hard to tell a son or a nephew that a role is too big for them, or that they need to prove themselves elsewhere first. An outside consultant helps make sure those conversations happen under rules known in advance, rather than as personal decisions that leave scars. When professionalisation reaches the sales team — one of the places where the shift from founder control to a repeatable process is most visible — I usually draw on what I explain about when to professionalise an SME's sales force.

What governance bodies a family business needs

Much of the disorder in a family business is resolved by giving each decision the forum it belongs in. When everything is decided in the same conversation — the shareholders' one, the management one and the family one, all at once and around the same table — everything gets contaminated. Governance bodies keep those conversations separate. This is the usual structure, scaled to the size of each company:

No company is born with all four. A small company with two shareholder siblings doesn't need a board of directors with independent members, but an informal family council from the start does it good. Part of the work is deciding which bodies to create now, with what composition and what rules, and which ones can wait until the family and the business grow.

Signs your family business needs a consultant

I'm rarely called in "to write a protocol". I'm called in because of symptoms. These are the ones that come up most often:

• The founder is seventy years old, doesn't delegate, and there's no handover plan on the table.
• The siblings or cousins who inherited the business don't talk about the business, only trade reproaches.
• Someone in the family wants to join the company and nobody knows what criteria to use to say yes or no.
• Family members who work in the business get paid "whatever's fair", and those who are only shareholders feel control slipping away from them.
• The next generation is trained and eager, but can't find room because nobody lets go.
• There's a purchase offer, a divorce or an inheritance, and suddenly nobody knows what the business is worth or who decides.

If you recognise two or three of these, the problem isn't urgent yet — that's exactly why it gets put off — but it is maturing. And these issues are resolved infinitely better in cold blood than once they've already exploded.

How I run a family business consultancy engagement

No two families are alike, so I don't sell a closed product. I do follow a path that adapts to each case:

• Diagnosis and listening. Individual, confidential conversations with the key members. This is where the real tensions come out — they almost never match the reason I was called in for.
• Mapping the three circles. Setting out on paper who is what — family member, shareholder, manager — and where the overlaps generating friction lie.
• Defining priorities. Deciding with the family where to start: it's rarely possible to tackle everything at once, and the order matters.
• Building agreements. Workshops to draft the protocol, design the governance bodies or map out the succession plan, according to what's most urgent.
• Rollout and follow-through. A protocol that gets signed and put in a drawer is worthless. What delivers results is staying alongside the family for the first months until the bodies run on their own.

Throughout the process I draw on legal, tax and commercial specialists whenever needed: I steer the conversation and the method, they secure whatever needs securing legally. I bring together all my work with family businesses and the strategic consultancy approach I bring to it.

What a family business consultancy costs

I can't quote a flat rate, because that would mean making it up: the cost depends on scope. Drafting a protocol for a family of two aligned shareholders is not the same job as ordering the succession of a third generation with several branches at odds and a company of some size. What I can explain is what determines the budget:

• The scope. A protocol, a succession plan or the design of governance bodies can be tackled separately or as a single integrated project. More fronts mean more work.
• The number of people. Every branch and every generation adds conversations, sensitivities and diagnostic time.
• The starting point. Preventing in cold blood doesn't cost the same as putting out a conflict that's already alight.
• Ongoing follow-through. A document handed over costs less than a process accompanied over several months — but it also achieves far less.

I usually work by project, in closed phases, so the family knows from the outset what each stage includes and can decide how far to take it. And yes, a good part of the work can be done remotely — diagnosis, workshops, follow-up; I reserve on-site presence for the delicate moments, when the whole family needs to sit in the same room.

Conclusion: setting rules before you need them

A family business doesn't break down from competing badly, but from not having agreed in time on what seemed like it didn't need agreeing. Family business consultancy isn't there to change the family — nobody can do that — but to give it a neutral framework for making those decisions in cold blood, with a method, and without leaving scars along the way.

If you recognise yourself in several of the signs in this article, or you simply want to start putting the handover in order before urgency decides for you, tell me about your case and we'll look at it together, with no obligation.

Frequently asked questions about family business consultancy

Does a family protocol have legal value?

It depends on how it is formalised. The protocol itself is a pact between family members: some of its clauses are moral commitments, while others can be elevated to company bylaws or shareholder agreements with binding effect. Deciding what stays as a gentleman's agreement and what is legally secured is one of the technical decisions in the process, and it should be taken with legal and commercial advice. Royal Decree 171/2007 also regulates the publicity of family protocols in the Commercial Registry (Registro Mercantil), for companies that want to give them visibility to third parties.

Sources

• Royal Decree 171/2007, on the publicity of family protocols — Official State Gazette (BOE).
• Law 29/1987 on Inheritance and Gift Tax — Official State Gazette (BOE).
• Law 19/1991 on Wealth Tax — Official State Gazette (BOE).
• Instituto de la Empresa Familiar (Family Business Institute).

Content written by Ángel Ortega Castro for angelortegacastro.com. Informational content; for advice tailored to your family business, get in touch.