Family businesses, as fantastic as they sound, are exceedingly difficult to run and sustain. They require long hours, intense dedication and extensive planning. But if you are successful, you will leave your descendants with a sustainable business and source of income that they can grow further in each generation.
The majority of multi-generational businesses fail at the third generation, so it is important to begin the first generation on the right foot and carefully train the following generations to avoid failure. The biggest tip for the first generation? Planning is the key to success. It sounds like a cliché, but it is true nonetheless. If you start the business by planning every aspect of family involvement, you exponentially increase your chances of success.
Tips for building a successful family business include:
- Work-talk. If the entire family is involved in the business, it will be tempting to continue work conversations past the end of the workday. This is detrimental to your relationships with your family. It creates a higher stress environment and reduces the work/life balance.
- Families are typically wrought with unsaid words and hurt feelings. If your family lacks in the communication department problems will fester on the inside and then explode. If you disagree and want to argue your opinion, do it. If family members are bottling up their feelings about work-related issues the business will suffer.
- Every family member involved in the business needs a defined role. When roles are lacking, chaos and confusion reigns. Assign roles that are congruent with each family member’s talents and skills. Everyone also requires their own salary. Resist paying everyone the same wage, but do not allow sharing of compensation levels. Pay rates need to match with job assignments.
- When the business is in its infancy, and when it’s not, be mindful of your resources and live and work frugally. This business is supposed to survive for many generations to come, so you need to make sure you’re not running it into the ground. You need to leave something that is successful for the next generation.
- Encourage every employee to explore and be innovative. What worked in the past will not always work in the future. Future generations need to continually bring new value to the business and stay up-to-date with the times. The world is always evolving, and the business needs to evolve with it.
- Family member status does not guarantee a job. Do not hire someone simply because you are related to them. If they do not have the skills you need, look outside the family. Look for ambition and work ethic rather than an impressive resume. Raw talent is refreshing and rejuvenates the business. Outside hiring also brings innovative ideas to the table.
- Successors need to understand every aspect of the family business before they are given it. Every aspect, no matter how small or seemingly unimportant, is critical to success. If they don’t know or don’t understand what they’re doing, the business will quickly fail.
- Next generation. Involvement should never be forced on any family member, especially children. It may be tempting to groom the next generation for taking over the business, but forcing them into a role, they are not suited for, or never desired breeds resentment. Allow children to pursue their own passions and discover their own talents and skills. They may return to the business, and they may not. You need to accept either outcome with joy on their behalf.
Interested in reading more? Here is our blog on Best Business Practices