Data shows that 70 percent of family businesses end their triumphant run even before the second generation assumes control over the enterprise. That is an unfortunate and overwhelming figure, especially if you are managing a family business yourself. That number is even worse to hear if you plan to turn your business venture into a personal legacy passed down your family tree.
However, that figure is easy to understand. Businesses are challenging endeavors. And they must be approached in a purely businesslike manner. If you have heard the phrase “nothing personal, it’s just business” before, you already have a grasp of how the dynamics of a family can complicate the whole thing. After all, you cannot get more personal with family.
So how do you ensure that your family business survives beyond your generation? Here are some ideas.
Get expert guidance
You probably already have family lawyers on your payroll. They take care of premarital agreements, which your entire family has to contend with, among other legal designations. It would be best if they understand business law as well, at least within the context of the family.
A reliable legal counsel allows you to keep your peace of mind. You know you always get the right advice on how to manage your business lawfully. That is on top of them, showing you the ropes when it comes to dealing with business-related family squabbles.
Succession planning
A family business is typically passed down from one generation to the next. At least, that is the goal. And that goal can be achieved by first creating a business succession plan. No, you cannot just wing it and trust that the right person will step up to the plate eventually. Such negligence might lead to irreparably damaging the relationship of those looking to replace you after retirement.
A business succession plan should already be at work ten years before relinquishing the business’s control. This will allow you to train your chosen successor properly. To avoid hurt feelings between family members, make sure to involve everyone in succession planning discussions.
More importantly, be realistic. Tradition dictates that you pass down leadership to your firstborn. However, traditions should be broken in favor of practicality. So choose someone from your family with tried and tested business acumen that will benefit further from on-the-job training.
Do not let everyone on board that easy
Just because you are running a family business does not mean you should readily welcome all family members looking for a job. As with any business, your main motivation for hiring should be skills and competency. If a brother or cousin wants to become the head of your marketing department without any experience selling products, letting them have their way could lead to a serious problem.
So learn to say no. Or better yet, let family members go through the same training and development programs other employees complete.
Stay frugal
Most family businesses succeed because of one unwritten rule. That is to stay frugal at all costs. They do not spend more than what they have. And most importantly, they do not borrow more than what they can afford to pay.
Sure, business expansion is an admirable goal. But it should be done at the right time and with sufficient resources. Do not risk financial loss just because you grab an opportunity way too early.
Employee retention
The cost of employee turnover is quite significant. Most family businesses do not have that problem, however. According to an HBR article, family businesses are better at retaining employees than other types of business organizations. Perhaps it is the family dynamics at play. Maybe these organizations have figured out how to keep employees happy.
If you want to ensure the success of your family business, invest in your employees. Make them feel like they are part of something great and enduring, that you have their back like, well, family.
Family businesses make up at least 30 percent of enterprises that rake in beyond $1 billion in sales annually. That should be an inspiring statistic if you are managing a family-owned business. Yes, despite the usual business setbacks exacerbated by having your children and siblings and cousins breathing down your neck while you peruse expense accounts, you can actually make it work. Just stay true to the business’s original vision, and you will be on the right track.
When things go off-kilter, go back to the ideas presented here. Often the most seemingly complicated problems have the simplest solutions.