“For the good of the family, business comes first. “ This is the motto every family business must embrace. Otherwise, the beginning of a successful business history will end up in a family chaos, causing financial loses and emotional distress. Overcoming the challenges of working with family should be the top priority. Here are the five must have’s for a prosperous family business.
A Strong Structure
A strong business organization is a must. It is crucial to have a competitive structure with suitable people for each position, even if is not a family member. Businesses tend to fall through when everyone is accepted only because they are family. Nepotism can diminish productivity if unqualified family members are given positions they are unable to execute efficiently. In order to succeed, the business must have a solid and capable structure and foster a love for the enterprise and hard work. Tip: Apply a policy against nepotism and make performance evaluations every now and then.
A Business Council
The establishment of family business council is essential. Having a forum for discussion in which family members can address emerging issues in a formal manner, will take the business into the right direction. The previous definition of roles within the council is important for effective meetings and problem resolution. Also, a written protocol establishing the rules of such meetings will give more stability to the business and will allow the family to be organized, regulate their long term interests, and embrace the same vision, values, and commitment to the business. Tip: Discuss the issues of the protocol ahead of time, without the pressure of having a conflict ad portas.
The company must establish a strategic plan in writing created by teamwork. The family business should diversify around the core business. In the strategy, renewing and closing unprofitable businesses, giving leeway and open spaces to the new generations should be central. Tip: do not cling to the past, innovation allows improvement.
A company that forgets the importance of reinvesting can generate a serious financial hole. Having a plan of where the money is going is a must. It is not uncommon to see family members spending money in non-business related commodities once some profit is generated. The lack of financial planning can cause the company to distribute in excess, take unnecessary risk and waste resources. It is important that the company not only work for finances, but reinvest them. Tip: Make a long term financial plan in which everyone agrees. Companies with a sound financial plan report 33% more income than average.
Only one in every four family businesses makes a retirement/succession plan ahead of time. Having a succession plan before it is needed is crucial for a successful company. The lack of planning highly increases the possibility of failure when passing to the next generation. It is important to note that as the succession plan is developed a process of revisions and monitoring must be carried, hence the significance of developing it ahead of time. Having the right person to be in charge of the family business should be a priority, prepare, and train the person beforehand in order to be available and capable when needed, even if this means the person is not blood-related. Remember that business is first. Tip: the retirement of the patriarch or matriarch of the company is a process, not an event, prepare wisely.
Prosperity comes with preparation. In every family business, given the complex relationships among members, agreements and planning are crucial elements. In order to achieve these, a healthy relationship strong on values within the family must be also present. Family and business can be successfully combined and particularly rewarding if practiced intelligently. Subscribe here for unlimited access to our library.