5 Ways to Manage Family Business

Out of the different types of business models, managing a family business is one of the toughest models. Multiple generations of a family-related by blood, marriage, or adoption are engrossed and involved in taking the key decisions involved in running the business. As a matter of fact, the family business is the oldest and most common model of economic organization. The simplest definition for describing a family venture is where multiple members of one single family manage a business and are also the major owners

As families and business expand, managing a successful business over multiple generations becomes a daunting task. According to a survey, only 30% of family businesses survive into the 3rd generation of family ownership. This reflects the high level of competency and commitment levels required to continue their flagship.

To sustain in this competitive business environment, 2 things are obvious- achieving strong business performance and keeping the family united to carry the family legacy.

This article gives you a deep insight into what are the key aspects and the top 5 best possible ways of managing a family business over the years.

Communication is the key

Proper and constant communication is one of the best and easiest ways to keep conflicts at a distance and to manage any business.

Spotting issues at early stages and addressing them through a transparent communication process is enough to prevent a conflict from developing. Surveys suggest that with early intervention, you can prevent issues that convert into large family complications.

In a family business, making a break from daily routine work, discussing issues with the concerned members, and giving them the opportunity to put forth their opinions can help to manage the business for generations to come. Creating a written protocol regarding internal communications in a family ownership helps in ensuring appropriate conveyance of information. Here an effective internal communication plays a vital role and therefore along with verbal communication, written communication is also important. The use of memos, official letters works to ensure that all members of the family have acknowledged the communication and is on the same page.

Managing finance

In many instances, mismanagement of finance has been a key attribute which results in conflicts or even leads to segregating the family venture into multiple different entities.

The financial needs of the business must come first and such bank accounts should be only used for business purposes. Family members have to nurture the habit of paying their bills and expenditures which are personal in nature.

Mixing the expenses can leave the company at risk or over-leveraged with debt to support a lifestyle versus the ownership. Separating business and personal expenditures also help you keep your taxes on the right track. As long as the business transactions are separate from personal ones, the family will be in a better position to understand the financial stability of the business.

Logical approach

Irrespective of the fact that the venture is managed by your own and extended family members, a business is to be run as a business. You have to be objective and have logical discussions while interacting with members. Business decisions are crucial and hence every decision or issue discussed should be meaningful.

With family, take time to explain business decisions and also motivate them to be a part of transparent and logical discussions. Plan a family business meeting instead of relying on discussions around the dinner table to run a venture.

Every family member has to keep a check on their emotional feelings and thoughts while doing a business interaction. Taking a logical approach helps to build your business and portrays your viewpoint on key business decisions.

Value relationships

Every relationship matters, be it your loved ones in your family, outside vendors, employees, and customers. Establishing healthy boundaries between family and business is the ultimate objective.

In words of Wayne Rivers, President of ‘The Family Business Institute’ in North Carolina, “if you don’t tend to the relationship outside of the business, you won’t have a relationship”. Along with taking care of the business, you have to value and nurture family relationships. No matter, how you interact with your family members in office, at home there should be a relaxed and positive environment. The best way to balance your office and home relationship is by ensuring quality time with your family members at regular intervals. Weekend trips, annual holidays with family are perfect examples. Everyone in the family should value their family ties before thinking about any business deals or interactions.

Acknowledge efficiency

One of the best ways to put conflicts at a bay is to have an honest approach in appreciating and acknowledging good work.

Selection for a crucial job should be based on skill sets and qualities, rather than thinking about the family ties. If a wrong person is selected for the job, it’s ultimately going to damage the business as well as effect family relations at latter stages.

The selection process can be a discussion in presence of the members related to the business and depends on the requirements; the best person gets the job role. Another practical approach can be to involve the next generation at an early age so that they can have a first-hand idea of the business. This gives you the opportunity to analyze and evaluate to monitor their interest areas in managing the business. The senior and experienced members of the family have to encourage others and be neutral while appreciating the best members of their family and celebrate the occasion with the entire family.

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YRC is an “Expert Service Division” of Mind-A-Mend Consultancy Pvt. Ltd.