A family business is pretty much a company just like any other, with the exception that a number of its leaders and managers are all members of the same family. These kinds of organizations are the oldest known businesses out there, and you can find them in almost every country across the globe.
The fact the management mainly consists of family members does give it its own set of benefits and downsides. On the plus side, there is great independence, freedom, and control. The whole lifestyle of people who work in a family business is different. For example, it can be a lot more flexible.
However, as we have ascertained, there are also certain downsides. One of the biggest ones is incorporating a succession plan. A lot of such businesses fail to do that, so if the founder, for example, suffers a tragic accident, the rest of the family finds itself in a very difficult situation where they don’t know how to patch everything up together. Due to this fact, a lot of family businesses never reach the next generation.
In this article, we are going to discuss the Do’s and Don’ts of starting a family business.
Do – Reach a mutual agreement on a leadership structure
Every family business is an organization that is bound to put all the family relations to a test. No matter how much certain members are loyal to others in everyday life, starting a business is a whole new kind of “relationship”. Therefore, it is very important that everyone agrees about management decisions, clearly underlying roles
Don’t – Forget to separate your personal and family lives
On the family level, it goes without saying that the members disagree and face personal conflicts. Every family works like this, so it’s hardly a surprise. What is essential is that you are extremely cautious in terms of letting such issues reflect onto work relationships. Your family problems need to remain within the family. The business mustn’t suffer due to them, because this will lead to diminished productivity, and therefore, a loss in profits.
If there is a family member that simply cannot separate his private and business life, then they shouldn’t be apart of the company. As for everyone else, you must always make sure that
Do – Set up a succession plan
As we have already mentioned, failing to have a proper succession plan is what tears the majority of family businesses apart. In order to avoid this enormous pitfall, you need to start planning very early during the process of building your business. The fact is that it tends to be difficult to choose who is going to assume the position of the head of the company’s operations. While your first choice would probably be your children or relatives, sometimes this isn’t the best choice. There are times when there is a person outside the family who would be the best choice for extending the life of the business.
Again, according to the advice from experts, such as those at Chedid Storey Legal, this is another one of those moments when you should seek help from a professional. You need someone who is objectively going to determine who the best successor is. Of course, be careful how you treat everyone else after you make this decision. Talk to your other family members and make sure that their future roles are also
Don’t – Be ignorant about who should and shouldn’t be a part of the company
Another fact about family businesses is that they tend to attempt to involve everyone within the family, and intend to make the whole endeavor mostly a family thing. This is pretty ignorant of the matter that not everyone that you are related to is really a person made for such a role, even if they really want to do it. Also, some of your family members just don’t want this to be their career path.
A wise business owner knows when to let go of such people. After all, it is a business you want to run, and if you hire people that are incapable of doing the job properly, your ideas and operations will fail, and so will your company. Also, if you force a family member into the business, you will have an employee that doesn’t care about their job. Basically, keep in mind that nepotism isn’t good for business, and your decisions need to be based on merit.
Do – Prepare for failure
Remember that, no matter what kind of business you are starting, it can always either reach great success or simply crumble into pieces. This is why it is crucial that everyone who decides to take part in the family business needs to be prepared for the fact that things might not go as planned, and that they could lose the money that they have invested.
So, when starting a family business, sit down and have a proper talk about how everyone feels about taking a risk, and if they are prepared to bear with failure that just might happen.
A family business is an endeavor that comes with its own set of challenges, due to the fact that it involves people who are related, and whose relationships may or may not affect the outcome.
Consider both the upsides and the downsides of running such a business, and think about all the Do’s and Don’ts that we have covered in this article. If starting a family-run company is something that you really want to do, you want to do it right, and avoid the pitfalls that many before you have fallen into.