- Common values - Most likely, you and your family all agree on what is right and wrong and how things should be done. For you and your business, this will give you a greater sense of purpose and pride.
- Strong dedication-if you want to make your business last, you'll probably put in the extra hours and work it takes to make it a success. It's more likely that your family will understand that you need to be more open with your work hours.
- Loyalty- If you have strong personal ties with your family, you're more likely to stick together through tough times and show the drive needed to succeed in business.
- Stability-knowing that you're building for future generations makes you think about the long term, which is important for success and growth. But it can also make you unable to respond to change, which could be harmful.
- Decreased costs - There may be fewer costs because family members are more likely to give up money for the business. One way they might help the business in the long run is by taking less pay than they would get elsewhere. Another way is by delaying pay when the business is having trouble paying its bills. If you only hire close family members, you might not need managers' liability insurance when you hire them.
- How the company's shares will be split among family members and if there will be non-family owners
- To make sure that business decisions are made for business reasons and not personal ones;
- To lay out the roles and responsibilities of family shareholders who work in the business, those who don't, and outside shareholders;
- To reward family members, whether it will be different to remuneration for non-family members and what problems this could cause you will cope with conflict when it arises
- To communicate with your family when you are also their boss
- To avoid resentment when deciding who will succeed you
- To ensure that the family's finances aren't entirely dependent on the business
- Family members might think they know what other family members want or feel;
- Personal ties might make it hard for people to say what they think;
- the head of the family might take over the business even if they aren't good at running a business; one family member ends up running the show;
- Family members who aren't involved in the business don't understand the goals of those who are; and so on.
- Personal grudges turn into business grudges and back again
- Auditors or managers who are not family members feel left out
- Hold all meetings at work instead of home so that personal issues don't come up;
- Set up ways for employees to give and receive constructive feedback, which can help keep staff, especially non-family employees, from feeling demotivated and uninvolved;
- Plan regular away days to talk about the business's strategy and direction;
- Add a non-executive director to the board. Setting up an advice board is another choice. This will give a neutral view and help keep feelings out of business decisions.
- Write down rules for how the family should interact with the business in a family constitution.
- Business goals, vision, and ideals
- Leadership
- Management system
- Rules for leaving and taking over
- Rights, duties, and obligations of family positions
- Rights, duties, and obligations of family members who don't work for the company
- Training, pay, and evaluation of workers, both family and non-family
- Ways to communicate
- Ways to settle disagreements
- A person should be paid based on how much they are worth, not how much they need. Check out how much the job pays in the market.
- High pay shouldn't be used to get family members to work for the business. Also, they shouldn't have to work for ridiculously low pay to show their loyalty.
- Benefits, bonuses, and other benefits should be based on clear criteria.
- Fake jobs and wages that are too high shouldn't be used to give tax-free money to family members.
- Pay plans for after retirement should be agreed upon before they start to be used.
- Employees who are not related to the family and who do the same work as family members should be paid the same.
- Does the person I want to take over want to do it?
- Does my plan work for everyone in the family?
- Does it make it less likely that there will be conflict?
- Will passing on things in the family be tax-effective?
- Is it best for the family to take over? Would a different way to get out of the business, like a trade sale or management buy-out, be better?
1. An overview
When compared to other businesses, starting, running, and working in a family business can be very rewarding. The staff may trust each other more and have more freedom. Careful management will make it easier for people to talk to each other and less likely that people will fight over pay.
The best things about having a family business are spelled out in this book. It also discusses some of the biggest problems and how they might be turned into strengths that help the business grow and succeed.
2. Pros of running a family business
Many benefits that other businesses don't have are likely to be unique to family companies. Some of these are:
3. Important things to consider when setting up a family business
Before you start a family business, you should think about how you'll handle several problems. Think about these things:
4. Family businesses and talking to people
Setting up good lines of communication will help everyone in your business understand each other better and work together better.
You can avoid these problems by making a space where people feel comfortable talking and sharing their thoughts. It's important that people can share their worries without being blamed.
There are several useful things you can do. You could:
5. Dealing with disagreements in family businesses
Family businesses may be more likely to have disagreements than other types of companies. But disagreement can be seen as a good thing that leads to change. For instance, if family members
Don’t agree on the strategy direction of your business, you may need to rethink your business plan.
How to stay out of a fight
Think about how the people who work for your family business talk to each other. Are personal problems kept separate from work talks? Have you set up ways for all workers, not just family members, to share their thoughts? Does one person tend to be in charge?
For relatively small disagreements, it may be acceptable to call a meeting of the business's management.
For more important issues, you should involve a neutral third party. A non-executive member or business expert who can act as an unbiased third party can help many family businesses.
In a family business, having a family business contract is one way to handle disagreements well. If it is well written, this kind of paper can stop arguments before they start and help people talk to each other in a good way.
A family business constitution, also called a family contract, is part of a set of general rules. It explains the core principles and mission of your business and how committed your family is to them.
The process of writing a family constitution should be shared with everyone who has an interest in the business. The paper should be looked over often.
The following parts might be in a family business's constitution:
6. Reward and pay for family members
The objective is to have a pay plan that is regular, fair, and clear.
When these things are missing, anger and strife are more likely to happen. For example, if employees with family ties are paid more than employees without family ties for no good reason. People in the family who own shares but aren't involved in the business may also question how much those who are may be paid.
Create a plan for paying people:
People must think your pay strategy is fair and unbiased. Think about writing it down, telling everyone about it, and going over it often. Getting advice from someone outside the company, like an HR expert, can be very helpful in making sure that choices about pay are well accepted.
7. Planning for the next generation in family businesses
Of the things you have to think about, one of the most important is how to best pass on your business to the next generation. It's important to find a balance between the wants of yourself, your family, and your work.
Plan for the next person to take over early on, ideally when you first start the business.
The steps you take to find a replacement and hand over all of your duties should be outlined in your succession plan, along with your main goals for the process.
Back-up plans in case something unexpected happens like your chosen candidate quitting the job you should ask yourself things like, "Does the person I want to take over have the right skills and abilities?"
Before you start your business, read our guide on how to plan your exit.