No doubt about it, running a business with a spouse, parents, siblings, children or other family members presents unique challenges over and above the usual problems a small business faces. That's why only one in three family businesses survives to the next generation.
Here are four essentials for striking the right balance when operating a family business.
1. Set some boundaries. It's easy for family members involved in a business to talk shop 24/7. But mixing business, personal and home life creates a volatile brew. Limit business discussions outside of the office.
2. Establish clear and regular methods of communication. Problems and differences of opinion are inevitable. Consider weekly meetings to assess progress, air any differences and resolve disputes.
3. Divide roles and responsibilities. While various family members may be qualified for similar tasks, duties should be divvied up to avoid conflicts.
4. Treat it like a business. A common pitfall in a family business is placing too much emphasis on "family" and not enough on "business."
Action Steps
The best contacts and resources to help you get it done
The best contacts and resources to help you get it done
Decision-making in a family business can sometimes be too closed. Fresh ideas and creative thinking can get lost in the tangled Web of family relationships. Seeking guidance from outside advisors who are not affiliated with any family members can be a good way to give the business a reality check.
I recommend: The Family Firm Institute offers an excellent guide for finding and choosing a family business consultant. Family Business Magazine also has anadvisor directory. Membership in FFI will get your family business access to a variety of other services and information. Family Business Consulting Group offers consulting services and a lot of helpful publications through Family Enterprise Publishers.
Many major universities across the U.S. have developed specialized family business centers that are a terrific place to network with other family business owners and experts.
I recommend: Check the Family Firm Institute's comprehensive list of Family Business Centers, Education Programs & Forums around the world.
Family Business Magazine calls itself "The Guide for Family Companies."
I recommend: The Family Business Magazine eNewsletter is free and will keep you abreast of the latest news and operating tips for and about family-owned companies. Family Business Magazine also lists family business conferences of interest. Family Business Review, published by FFI, is another good resource.
Family-owned businesses have unique needs for insurance
I recommend: Mass Mutual, the big insurance company, has specialized in meeting small and family-owned business needs for over 150 years. The firm has developed a list of solutions that can help your family business avoid common mistakes. Mass Mutual also sponsors 60 university-based family business centers across the country.
Family-owned businesses have a big stake in and changes the federal government makes in the estate tax laws.
Tips & Tactics
Helpful advice for making the most of this Guide
Helpful advice for making the most of this Guide
· Family-owned businesses offer unique benefits. One is access to human capital in the form of other family members. This can be a key to survival, as family members can provide low-cost or no-cost labor, or emergency loans.
· Treat family members fairly. Qualified family members can be a great asset to the business. But avoid favoritism. Pay scales, promotions, work schedules, criticism and praise should be evenhanded between family and non-family employees. Don't set standards higher or lower for family members than for others.
· Put business relationships in writing. Be clear up front about compensation, exit plans and other details before they become a problem.
· Develop a succession plan. A family business without a formal succession plan is asking for trouble. The plan should spell out the details of how and when the torch will be passed to a younger generation.
· Require outside experience first. If your children will be joining the business, make sure they get at least three to five years business experience elsewhere first; preferably in an unrelated industry.
The official source of Operating a Successful Family Business is
the Family-Owned Business Education and Training page at Business.com
the Family-Owned Business Education and Training page at Business.com
A family-owned business can generally be defined as any enterprise in which two or more members of the same family have a substantial ownership interest and also participate in the management of the business.
Family enterprises form a significant part of global economy and indeed, some of the world‘s largest corporations are family-owned. Statistics generated by the University of Southern Maine‘s Institute for Family-Owned Business have it that 35 per cent of Fortune 500 companies in the United States are family-controlled.
In Nigeria, names like Dangote, Globacom, Ibru, Anyiam Osigwe, Eleganza and Folawiyo readily come to mind in any discourse on family-owned enterprises.
Many Small and Medium Scale Enterprises in Nigeria are believed to be family-owned. The compositions are made up of numerous combinations, such as husbands and wives, parents and children, and extended family members, who occupy different roles like stockholders, board members, partners, advisors and employees.
According to the Managing Director, Peacegate Oil & Gas, Mr. Ayorinde Adedoyin, an entrepreneur with a family business background in the popular Doyin Group, owned by his father, family-controlled businesses have a number of common challenges that require creative, rather than generic solutions.
He notes that growth limitations, family issues, lack of clear-cut policies and business norms for family members, lack of outside input on how to operate the business, lack of written strategy, poor succession planning, and resistance to change are among the major problems facing family businesses.
Adedoyin bemoans a situation, where many family businesses in Nigeria are waxing stronger and expanding from one sector of the economy to another, while some others have waned in influence.
FOB experts argue that the difficulties faced by family businesses often lead to their downfall. That is why only one-third of such businesses survive in the hands of sons and daughters, while only one-tenth of such continues through a third generation.
The ugly trend in Nigeria, whereby family businesses collapse after the demise of the founder, according to these experts, calls for serious attention. They say family businesses, regardless of their sizes, face significant challenges of continuity, longevity, and ultimately, success.
In view of these hurdles, finding ways to ensure their sustenance has generally been agreed upon by FOB experts as very essential.
According to the Group Executive Officer, Research & Marketing Services Limited, Mr. Adeola Tejumola, there is nothing wrong with a family business, if it can be managed dispassionately. He says it is not compulsory that a family member should manage the business, especially when such a member lacks the right skills.
He notes that lack of capital and resistance to re-investment in the business or pursuit of outside resources have often been known as two major factors that stultify growth in family business.
Proffering practical solutions, he says, ”A family business may grow out of its area of competence but the business can only be sustained by opening up and allowing capital and the right competences to come into the business from available outside sources. By opening up, you allow an array of opportunities to come into the business. Opening up does not mean you lose your stake.”
Citing his firm as an instance, Tejumola says, ”In 30 years, RMS has experienced three transitions; from when the chairman was running the business to his son, and now to a publicly owned company, with the merger with TNS, the world‘s number one marketing research company that is quoted on the London Stock Exchange and Nasdaq. We are going into an era, whereby the company is no more owned by the Tejumola family, although we are still a significant shareholder. The company will now be called TNS RMS in Africa.”
In what seems a piece of advice for SMEs, Tejumola submits that every small business has the potential to become big. Hence, he says, conflict among children of business owners must be nipped in the bud. The best way to achieve this in his view is to ensure that the children of FOBs are raised in a closely knitted manner, affording them the right training and education.
On the right kind of management that ensures success, he says effective communications, strong leadership (from the top), dispassionate and objective decision making are essential recipes for sustaining family businesses.
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