5 Tips for Successful Family Businesses

You’ve heard the definition of a dysfunctional family? One that has more than one member in it. How about if you take that dysfunctional family and try to run a successful business with it? Getting a new business off the ground is difficult enough, and adding the complications of family relationships can only make it that much tougher.

According to the Family Business Institute, only about 30 percent of family businesses survive into the second generation. About 12 percent are still around for the third, but only 3 percent make it to the fourth generation.

Here are a few tips to help your family business survive to the next generation.

1. Put the right people in the right jobs

This is a key component for the success of any business, but becomes particularly true for running a family business when you may feel pressured to hire Uncle Marvin for your open sales position because he just got laid off.

What if Uncle Marvin’s background is in accounting and he’s known as the family introvert? Just because a family member needs a job doesn’t mean they should have one in your company. Make sure you find the best people with the right skills for any position.

2. Hire outside help

In addition to needing an outside perspective on occasion, outside consultants can help with conflict resolution between family members and offer an unbiased perspective on needs the company may have. You’ve heard the expression, “Don’t air the family’s dirty laundry.” Well, that’s exactly what you need to do with consultants.

Don’t be afraid to tell them about your brother Joe’s absenteeism due to his alcoholism if he or she needs that information to make decisions about the future of your business.

3. Communicate regularly

Again, communication is critical for any business to success. Perhaps in family businesses you run a greater risk of miscommunication of key information if employees aren’t properly informed, as they are seeing each other outside of the office. Make sure that all employees understand the long-term goals and vision of the company and are well informed of any developments.

You may want to set up weekly or monthly company-wide meetings as a means to communicate and allow for questions.

4. Have the same standards for everyone

Nothing demoralizes co-workers faster than having different standards for employees. If your company has non-family members working for it, you especially need to pay attention to this one.

Don’t allow your son to take off every Friday afternoon for his ski lesson while others are left to cover for him, or promote family members at a quicker rate than others in similar positions. Have the same vacation policies and compensation guidelines for everyone.

5. Have a succession plan

I’ve written about this before in a previous column:  the greatest threat to a family business is the failure to plan and manage succession well. I can tell you from personal experience how important this one is. I encouraged my dad to take an offer of $5 million to sell his company. He refused. Fast forward ten years and dad, who now had dementia, had been swindled out of money and the company ends up being worth nothing.

For more tips on how to pick a successor, see my previous blog post on Filling Your Own Shoes.

Family businesses do thrive. In fact about 35 percent of Fortune 500 companies are family-controlled. You just need to pay attention to how your family members contribute to the success of yours.

One thought on “5 Tips for Successful Family Businesses

  1. Pingback: The Peter Principle at Work in Family Businesses | The Turnaround Authority

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