8 Steps to a Better Family-Owned Business
Jul 06, 2017 01:00PM ● Published by Melanie Heisinger
New businesses don't necessarily start out to be a family-run entity. Through the process of growth, family members can become engaged in the business and over time become ‘family owned'.
All businesses have challenges, and family businesses are no different. Problems are exaggerated in a family business. For example, ever tried to fire your son, father or mother-in-law? Know going in that you'll have to work hard to make it work.
The inherent emotions of family issues, relationships, financial and health problems can make things difficult. Confusion about roles and responsibilities and a tendency to be lax on who's in charge makes it hard on non-family staff. Who do they really work for, and who should call the shots? What about passing on the reins to the next generation? The lack of a timely plan and effective training for the new owner can be disastrous.
Left unaddressed, these challenges can cripple the business, particularly during and after a generational transition. Statistics show that a significant majority of family-owned businesses don't survive to the second generation; even fewer to the third. There is a famous saying in Mexico about family-owned businesses: "Father-founder, son-rich, grandson-poor." The founder works to build the business, the son takes it over and lives well while ill-equipped to manage effectively, and the grandson inherits a dead business and empty bank account.Here are 8 steps you can take to avoid your business becoming a statistic:
1. Determine that the needs of the business should and will outweigh the personal interests of the participating family members. Write this down, commit to it, and don't forget it. Get this on the table early and get consensus. This should be a factor in every decision going forward.
2. Build a realistic business plan, and ensure all family members who are engaged in the business are on board.
3. Determine who brings what skills and realistically place people where they can be most useful. If the management team is lacking in a particular area, hire what you need.
4. Don't hire family members who are not qualified or lack the skills and abilities the business needs (remember #1?).
5. Determine in advance who is in charge. Put it in writing. Management by family committee isn't the best way to go. Get over the idea that everyone must have an equal share.
6. Define roles and responsibilities through clear job descriptions. Communicate throughout the organization.
7. Get outside help to build a written succession plan so that the transition of authority to the next generation is smooth. Train the successor.
8. Don't leave issues unaddressed. Get them on the table, and resolve with the best interests of the business in mind (there that #1 again...).
Working in a family business can be a real blessing, but it takes commitment and dedication to avoid the pitfalls.
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