5 things every family-owned business needs.
Operating a family business can be a challenge at times. It’s not uncommon to find yourself caught up working in the family business instead of rather working on the business – if you know what I mean. At the beginning of this fiscal year, you are presented with an opportunity to have a sitting with your family members to deliberate on some of the things you can do to boost the performance of your business. This article highlights five key things any family business should do or have.
A succession plan
For most family businesses, succession is viewed as a goal rather than an ongoing process. If you and your family members have not set up a succession plan or identified successors, you are most likely setting your family business for failure.
Unexpected emergencies such as illnesses or the death of a key manager of the family business could potentially threaten the future success of the firm. This is why early planning on succession or transition of the company to the next generation is important. Succession planning entails determining who will step into the management of the business once you or your managing partners are not around.
If there are younger members of the family who are interested in the business, now is the time to groom them for future company management. In today’s world, you might want to expose the younger generation to the corporate world in general. This helps your children pursue their options while adding more value to your business.
A clearly defined HR policy
Family businesses tend to approach hiring differently. While some treat the family members with privileges when hiring, others treat family members like all other employees. The first approach is a dangerous one because you could end up hiring unqualified family members into key management positions leading to business failure.
Family dynamics often affect promotion and hiring procedures. For the sake of your family business’ success, it’s recommended that you put professionalism before family member privileges. The company’s human resource policy should clearly set out the qualifications, roles, and responsibilities for each position, and the expectations one must meet to be awarded a promotion.
The major cause of friction between non-family and family member employees concerns remuneration or compensation. If your company favor family members by paying and promoting them unfairly, you will have a hard time retaining qualified non-family employees. Take time to assess your current remuneration structure and make sure all employees are compensated fairly.
Investments and reinvestment plans
To grow your business strength and wealth, you will have to invest and reinvest company revenue. Due to the fact that there are multiple parties interested in a family business’ revenue, it is important to have an agreement on profit sharing and investment strategies. This will not only help avoid conflicts, but it will also boost business growth.
Investments can be done either within the business or outside the business. Investing in new technologies such as a time clock software, for example, is a reinvestment of revenue back into the company. If your business deals in household products, you can decide to invest in real estate as an external investment project.
A financial agreement
Are your family and business assets protected from interested third parties? It’s not uncommon for family businesses to run into financial troubles due to divorces, lawsuits, dissolutions, partnerships, among other financial disputes. If your family company does not have a financial agreement set in place, you could be exposing your family wealth to third party claims.
It’s recommended that your approach the topic on management and protection of family wealth early enough to avoid complications in the future. If a family member divorces, for example, and you do not have a strong premarital agreement in place, the outgoing spouse could have a substantial claim to the company’s assets.
Disagreements on financial matters are one of the major reasons why family businesses dissolve. You should invest your time in speaking to a seasoned lawyer about your current family assets ownership and protection strategies.
Integrate family into your business branding
Research shows that family businesses that refer to themselves as families in their branding benefit more from community orientation, customer perception of trustworthiness, and long-term perception of social responsibility.
Running and managing a successful family business calls for commitment and discipline from all family members. Having a well-thought-out structure that incorporates everything that has been discussed above will help your family company soar to greater heights.