A shared visionA great place to start is to consider your vision and ambition. Ask yourselves why you want to be in business as a family? Is it to spend more time together, or do you want to build an empire to support generations to come? If you?re not all aiming for the same thing, then chances are one or more of you will end up disappointed. Next, think about ownership and control. You may be starting as a family business, with only family members owning and running it, but will it always stay that way? As the business grows, will you open it up to non-family members? This may be inevitable if you don?t have family members with the right skills to fill the roles. If you want it to remain a family business, how far out do you extend it? Cousins, aunts, and uncles may be included, but what about non-blood line family members such as in-laws? If you do have other, non-family members on the board, you have to remember to fully include them in the decision making of the company. Now, this may seem obvious, but how many meetings or discussions are held round the dinner table rather than in the board room? Whilst ownership and control may stay within the family, most family businesses will have non-family member employees. This is fine, and as with any other business, you simply recruit the best person you can find for the job. But what do you do when a family member wants a job? Is there an expectation that you will always be able to find a job for any family member who wants to work for you? This is one of the areas where I see the most problems. A family member is given a job, but they?re not the best person for it. This causes resentment from other non-family member employees who have to work with them, and often feel they?re working doubly hard to make up for the family member?s failings. When it comes to performance reviews and salaries the problems get even worse. If a family member isn?t performing as well as a non-family member employee, but is given the same (or sometimes a greater) salary, you can soon find bitterness creeping in. Then, the performance of the non-family member employees drops off too and the business suffers all round. To avoid this, you could make it a requirement that a family member must be suitably qualified, or even experienced by working in another business first. If you have set this expectation right from the start, it shouldn?t be an issue for the family member, and it will avoid problems with the other staff members too. If a spouse of a family member is involved in the business, what happens if the couple separate? They may both be very good at their jobs and making valuable contributions, but continuing to work together may be intolerable. Should there be an obligation for the non-family member to step down? If there is, how do you ensure this is done fairly so that this doesn?t cause even more problems?
What about the next generation?Are you building this business with a view to future generations taking it over, or will it be sold at some point? What if future generations don?t want to continue the business? At that point do you consider selling it? Remember, a business must be saleable to get the best price for it. If it?s too dependent on a core group of family members, it may not be the most attractive business to a potential purchaser. Running a family business is, in many ways, no different to running any other business. However, as a director of a business, you have to remember that you?re under a legal duty to act in the best interests of the company. But as a family member, you also have a loyalty to other family members and naturally you will want to do what?s best for them. So, which one wins? This conflict between business life and family life is where many of the problems arise and we will look at them in more detail my next article. If you?re thinking about starting a family business, or are in a family business and have never considered these issues before, please email me at firstname.lastname@example.org with any questions you might have. You may also want to look back to my startup series where I covered some of the most important issues for starting any business.
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