There are a number of aspects to running a family business that meets your needs. To ensure your expectations are met it is important to think about what the needs of your family are.
A family business that is successful is a top priority
Although a family business is complex, it comes with a competitive advantage. This is because the nature of a family business is that it often has a natural core set of values and beliefs that lead to a strong culture. This is something which traditional businesses often strive for, but without the cohesion often generated by family leadership.
However, when family and business mix there is often a new level of complexity. Every business is different but the family dynamic brings a unique element to the operations. There is definitely no ‘one size fits all’ model for a family business!
Below are our top tips for creating a successful family business!
Professional Communication is critical
One of the most important measures of success for a family business is open and clear communication. Don’t take ‘short-cuts’ with a family member. Don’t make presumptions. When it comes to family it becomes very important to remember who you are talking to and how that conversation would proceed if you weren’t related. For example, are you talking to your marketing manager or your daughter? Ensure family members have clear roles within the business and that they understand their place now and in the future. An essential component of this is ensuring family have written KPI and other guidelines such as non-family employees do.
Leave work at work and home at home
Anyone with a family business can testify that business conversations occur at home around the dinner table and in the bedroom. When the lines between home and business are blurred, separating family decisions from business decisions can be difficult. The concept of work/life balance and healthy family relationships can often be forgotten. Be aware of this! It is important to create rules to clearly separate home from business.
Have a Management Board
Having a management board that includes family and non-family staff is vital – don’t confuse ownership or inheritance with management. The mix of the right people ensures unbiased decisions and that choices are made for the success of the business, not just the family. If the business is not large enough for this, consider using other resources such as your Business Advisor.
Where does the future of your business lie?
It’s easy to get caught up in the day-to-day routine of running your business but it is important to stop and think about where the business and the family want to be in 5-10 years. Develop a succession plan. It’s important that multiple generations are involved in this decision and that everyone is on board, so it may help to have an outside party lead this discussion. From here a plan should be made which can (and likely will) change over time, but it’s important to start now. There are many intricacies related to succession that our Advisory Specialists can assist with including ownership structuring, transition planning, risk prevention and business vision.
Create a new generation of leaders
Don’t sit back and just let things happen – make them happen. A family business needs to give that bit of extra attention to creating not just current, but future business leadership. So your kids have decided to take over but you aren’t sure they’ll be ready. You want and need them to be as capable in leadership as non-family leaders in the business are. Then make it happen.
You have the advantage of the motivation that can lie in family members as they too look to the future. They typically want the business to succeed because it is ‘theirs’ and it is their future. It is your role as the business leader to ensure the next generation is ready. Coach them, involve them with key stakeholders and show them the intricacies of the business that only you know. Don’t fall for thinking there’s plenty of time for that later. You need to start this process now. Leaders are not created overnight. It takes time to create a leader as great as you!
Remunerate family members for their value, not their bloodlines
It’s important in any business to pay staff for the value they add to the business with an eye on market rates. This is of paramount importance in a family business. Family members do not have a right to remuneration simply because of their relationship to the owners: they should be paid for their contribution. Never confuse remuneration with return on investment. Reward non-working family members based on their ownership proportion and nothing else.
At Accru Melbourne, we are very experienced in working with family businesses and understand the unique dynamics that operate within this very special sector. Contact our Business Advisory Specialists on (03) 9835 8200 or alternatively fill in your details below and we will contact you.