"Family business" means many things to many people, from the family farm to the heirs who own business empires built by their ancestors. Millions of small businesses today are family businesses. They might be a husband-wife or father-son team. They might be family members developing former farmland into a nursery or managing their golf course. They might be siblings turned partners trying their hand at a new bsuiness. They might be relatives working for relatives. The variations are endless because families are unique and opportunities for business come in all sizes and shapes.
As the manager of a family business you can utilize principles gleaned from the experience of others who have walked in your shoes. Much of that experience was painful. Managing family business is "tricky business." Your stress level will be lower if you learn from the experience of others. Here are four of those learnings.
Run the family business like a business, not like a family. Base business decisions on the market, the merits of your product or service and the company's ability to fill orders. Do not base decisions on whose feelings might get hurt, whose loyalties could be betrayed or what old scores haven't been settled.
Translation: family members are challenged to put aside family dynamics in favor of business principles and business-like behaviors. Sometimes children need to supervise parents in the business. Sometimes a family member needs to be the boss even though they are neither the oldest, smartest or most respected member of the family. Sometimes the family needs to hire an outside person to be the manager.
Be guided by the business plan. First be sure to have a business plan! Keep it up to date. One of the beauties of having a business plan is that it separates personal considerations from business considerations. The manager is simply following the plan. Unpopular decisions are not personal. The mere fact that you manage according to the plan serves to emphasize that business is business, no matter how many family members might be involved.
Debate the business plan at scheduled intervals and not at any other time. Families value peace and stability. Once decisions are made there is little desire to consider change and start debating all over again, much less risk triggering new arguments. Business, however, is not like that. There must be an openness to change in light of the ever-changing factors such as competition, market trends, labor and production costs.
One big factor triggering change is success. Success means growth in the business and also a need to carefully consider the best use of increased cash flow funds, tax sheltering of company profits and best use of surplus funds. Sometimes family members are tempted to view company profits as their piggy bank. The manager must take responsibility to prevent raids on the piggy bank if the business is to endure and prosper long term.
Be sure to seek appropriate professional advice. Whether it be accounting, legal, marketing or tax matters, keep informed and be guided by the best current thinking. Remember, the tendency in families is to set a course and stick with it. Decisions made in the past might not fit today's business climate. It is the manager's responsibility to keep company policy sensitive to current business trends. To the extent that you report advice from professionals you are giving a second message as well: opinions based on family considerations must be considered differently than professional business advice.
Translation: in families the views of each member matter and should be considered because in families the goal is to promote good relationships and mutual support. In business the goal is to succeed with the business. Family members are challenged to be good employees, good workers, good business directors and good business team players while putting aside personal matters. Separating family from business opinions and decisions is neither easy nor totally achievable but it should be the goal.
Bottom Line: family businesses vary greatly. All businesses vary greatly. The secret to managing is to stick with what successful businesses have in common: sound business practices. These begin with separating personal matters from business matters, following a sound and well-informed business plan, taking good advice and changing when change is merited.
Do these things if you want to have less nightmares and steadier nerves.
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