Unfortunately, when the right systems and processes aren’t set in place, your family business can crash and burn and tear apart the family in the process.
Family businesses account for 70% of all businesses in Australia. In our many years in business, we’ve come across a huge amount of companies started by family members, run by entire extended families, businesses that have been passed on through generations, husband-and-wife teams (like us), brother-and-sister teams, grandparents, parents – the works!
It’s always a beautiful success story to come across a flourishing business that has been born, bred and run by the same family for such a long time. But, behind the scenes of the warm and fuzzies, is a sturdy backbone of regimented processes and procedures protecting each member of the family, and ensuring there is a divide between home and the workplace.
We collaborate with a lot of specialists on matters such as strategic planning and business structure. These play a huge role in family business success.
Based on our experience, the following elements are crucial for any flourishing family business:
- Succession planning should be a priority. Everyone in the business, and in the family, should be very clear how the business ownership will be passed on. There should be a long-term plan in place, as well as contingency plans in the unfortunate event that one of the owners falls ill or passes away unexpectedly. It is hard enough to endure the legalities of passing on a business after a personal disaster, but when the owner in question is a direct family member, it brings in another layer of emotion and hurt which can cloud and complicate the process if it hasn’t been officiated properly ahead of time. Read more about succession planning here.
- Have everything formalised and in writing – even little conversations and procedures. We love our family, but how often do petty arguments descend into “he said, she said”? That is not the basis of a good workplace, and conversations about the business should be formalised as such.
- Separate “work” and “home” with a clear line. Problems from each environment shouldn’t cross borders. Easier said than done (we know), but it should be part of the culture of the business that personal issues are not brought to work, even when you’re working alongside people you know very personally.
- Have clear roles for each family member, and pay the award rate for that role. Paying grossly inflated wages to your son to do menial work has the potential to grossly inflate his ego and/or grossly inflate any contempt breeding in other employees who work just as hard. You can speak with experts such as an accountant to discuss other ways he may receive additional benefits from the business instead.
- Use third party advisors for unbiased advice. Having experts from outside the business come in to take care of legalities and structures can take away the “bad guy” mentality from you as the owner, or “head” of the family. It also means you’re getting quality, expert help in all areas of your business.
- Have a good management structure – don’t confuse ownership or inheritance with management. Everyone has strengths and weaknesses, and if leadership or management is not a strength of certain family members, then it will be detrimental to your business to put them in that role.
- Be open with all communication. Make sure all your employees, both family members and non-family members, are comfortable speaking with you about any issues they may have.
- Clearly outline the entry and exit conditions for family members involved with the business from the beginning. On a similar line to our first point – make sure everyone is clear on the succession and future of the business.
- Make an effort to include non-family employees. They will already naturally feel out of the loop, and people don’t do their best work when they feel left out.
- Use mentors and family business forum groups as a sounding board. You’re not the first family business in the world. While your own business, and your own family, are certainly unique – it’s likely the obstacles you face have surfaced for others, and you can use them for support and advice.
A well-run family business is a truly beautiful thing. Your family are your biggest cheerleaders, and business ownership is no walk in the park. It’s a comfort to know that you’re taking the journey alongside those who know and love you best.
Click here for our advice on running a successful business with your spouse.