Family-owned businesses make up a large portion of small businesses around the country, yet the challenges they face are exclusive. Karen Stern, partner in charge of BSW Small Business Services, discusses how to address these issues in this month’s “Financial Fitness,” as featured in Small Business Monthly.
Some of the largest and most successful companies are family-owned businesses. According to the SBA, 90% of small businesses are family-owned and -operated. Surprisingly, 60% of family-owned businesses don’t make it to the second generation and 87% never make it to the third. Here are some tips for managing the particularly unique challenges family-owned businesses face:
Establish expectations, roles and responsibilities for each family member. As with any employee, family members should understand their defined boundaries and expectations. Without clarity, conflict arises.
Put it in writing. People have short memories. This can lead to disagreements about the simplest things, causing tempers to flare.
Create a conflict resolution plan. Determine in advance a way to resolve disagreements in order to protect your work environment as well as your relationships.
Keep personal baggage at home. In the workplace, decisions must be objective, not personal. Unprofessional conduct ultimately affects the bottom line.
Establish a succession plan. It is critical to identify who will drive the business going forward and set parameters for what to do if the business fails. This plan should be reviewed on a consistent basis. Family members and key advisers should be involved in planning the future as a team effort.
Create a governing structure. It is particularly important to have nonfamily advisers as well as an advisory board. These independent experts – such as your attorney, CPA, insurance adviser and banker – are also helpful in planning the financial and legal steps of your succession plan.
Instead of focusing solely on “building the family business,” successful organizations focus on “building a business family.”