Working together in a family business brings unique joys, such as the camaraderie of working with loved ones and the joy of building a lasting legacy. However, running a family business also poses some special challenges. According to the Family Business Institute, fewer than one-third of family businesses last beyond the first generation and just 12 percent survive to the third generation. Here are five tips to help you make sure your family business thrives.
RUN YOUR FAMILY BUSINESS LIKE A BUSINESS.
Always treat your business like a business by properly documenting decisions and maintaining accurate financial records. Avoid pitfalls like making loans from the company to family members, or to letting a family member write off personal expenses, such as the purchase of a car or vacation home, as business expenses. Allowing for grey areas can land you in hot water with the IRS, as well as foster resentment among non-family employees.
CREATE A SUCCESSION PLAN.
A recent PricewaterhouseCoopers survey found that nearly half of family businesses had no succession plan in place for when the family owner retires, dies or otherwise exits the company. Enlist your accountant, attorney, key employees and family members in developing a succession plan that details who will take on key roles.
DEVELOP LEADERSHIP AMONG ALL EMPLOYEES.
Leadership decisions should be based on the business’s— not the family member’s—needs. Set a clear path to promotion and advancement for both family and non-family employees. Not every family member is cut out for the business, but with help from your attorney, you can structure the business so that non-employee family members can still have some ownership. Whenever possible, share information openly with family and non-family employees alike.
Business conflicts can infect family relationships; family problems can flare up disguised as business issues. Decide when discussing the business is allowed and when it’s off-limits (such as during dinner or at holiday gatherings). This helps ensure that family relationships don’t revolve solely around business and aren’t poisoned by business conflicts. Developing a plan for dealing with business-related disagreements between family members, both those who work in the business and those who do not, can help protect the family harmony.
GET OUTSIDE INPUT.
Whether you’re dealing with personal conflicts or trying to make business decisions, seeking opinions from trusted outsiders such as your attorney, board of directors or an SBDC Business Advisor can give you much-needed perspective.
For more information on growing your family business, contact the Economic Development Collaborative-Ventura County. Conveniently located in Camarillo, California, we’re here to help.