Planning Considerations for a Family-Run Business
Many small businesses are family-run operations. Some experts think that the latest economic turmoil may be generating more family-run businesses. When the economy encounters a rough patch and jobs are in short supply, many people consider the option of a family-run business. Young people just starting their careers are more likely to remain with the family business when prospects outside the family are slim.
Family businesses can be very rewarding, but they can also be tricky to manage. Interpersonal relationships tend to play a bigger role in family businesses than they do in other small companies.
Feelings get hurt, and when they do, the fallout affects both people’s working lives and personal lives. Divorces can wreak havoc on a small family business. So can battles over succession, especially when several children are in position to take over the company when a parent retires.
Another challenge unique to family businesses is recruiting, rewarding, and retaining outsiders — key employees who aren’t part of the family. Too often, outsiders may feel as if they can’t compete with the special privileges accorded family members.
You must directly confront all these issues during the business planning process. Fortunately, many of the special challenges of running a successful family business can be remedied. The first step, of course, is having a plan in place. A surprising number of small family-run businesses don’t get that far. Along with the features of any business plan, a family-run company’s planning efforts should include
Buy-in from all key family members in the business-planning process
Financial and governance policies that separate family issues from the business
A clear plan for succession
Compensation policies that treat all employees equally, regardless of whether they’re family members or outsiders
Policies for negotiating disagreements should they occur
Regularly scheduled meetings attended by all key family members
Revisiting and revising the business plan, important for all ventures, may be especially important for family-run enterprises. The process allows family members to raise and resolve issues that might otherwise fester. You can also use the planning process to boost morale and encourage a stronger sense of family — one of the biggest strengths of a family-run company.