Operating a Successful Family Business
Family businesses face unique obstacles. Here's where to find help.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.
- 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.
- 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.
- Divide roles and responsibilities. While various family members may be qualified for similar tasks, duties should be divvied up to avoid conflicts.
- Treat it like a business. A common pitfall in a family business is placing too much emphasis on "family" and not enough on "business."
Seek better balance with outside advice
Join up with a university-based family business centerMany 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.
Keep up to date on family business mattersFamily Business Magazine calls itself "The Guide for Family Companies."
Get your family business properly insuredFamily-owned businesses have unique needs for insurance
Stay abreast of estate tax matters that impact family business ownersFamily-owned businesses have a big stake in and changes the federal government makes in the estate tax laws.
answers to estate tax questions.
- 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.
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