According to the National Federation of Independent Business (NFIB), only 30 percent of all family-owned businesses survive into the second generation, while just 12 percent survive into a third.1 What does it take to survive? NFIB offers several tips to help owners of family enterprises beat these odds and pass a successful business on to their heirs.
1. Don't be afraid to evolve
Family businesses often like to honor traditions, but in some cases, this may hold them back. Tradition is certainly not a bad thing, and can lend credibility, comfort and recognition to your brand, but you can't be afraid to evolve with changing markets, trends, and technologies. You're still running a business and competing. It will be hard to do so if your competitors are able to meet customer needs more efficiently than you can.
2. Keep work and personal life separate
It's sometimes tough to keep work and personal life separate when you work in a family business. When your colleagues are part of your family, it's easy for conversations at work to turn to family life. Business goals should come first during work hours. Bringing family “baggage” to the office can also come off as unprofessional if others are around. Save the personal discussions for off hours.
It's also easy to bring work home. Even people who aren't in family businesses are having a harder and harder time with that these days, due to the prevalence of smartphones and related technologies. Still, you must try to keep things separate so neither work relationships nor personal relationships suffer.
3. Ensure positions are earned
When you have a family business, it's natural to want to help your family members, and this may mean giving them jobs or even appointing them to important positions. That's all well and good as long as positions and promotions are actually being earned. Otherwise, you may face resentment from other members of the company, and work will not be done as efficiently as it should be.
Communication is key for any business. Treat each other as colleagues who share common goals, and keep clear lines of communication with one another. Verbalize items that need to be taken care of, and ask questions. Make sure everyone is on the same page. Some family members might be inclined to make assumptions about others based on their personal knowledge about that person’s history or personality. The fact that you are related to one another should not impact your communication level.
5. Always maintain transparency
It pays to be transparent, whether or not you are operating a family business, but when multiple family members are making their living from one business, it is critical that each person is fully aware of all relevant information. In other words, do not keep secrets from one another. This applies to pay, expectations, policies, etc. If there are non-family members on staff, maintain a similar amount of transparency as appropriate to prevent resentment or feelings that family members are receiving special treatment undeservedly.
6. Remember, family members are employees, too.
Good employers are concerned about employee morale and want to ensure that team members can work together smoothly, be as productive as possible, and stay with the company over the long term. When a family member voices concern, seems unhappy in their role, or starts performing poorly, take it as seriously as you would if they were any other employee.
7. Know when to look outside the family
Some successful family businesses are composed entirely of family members, but this isn't always a great idea. It pays to know when you need to bring in outside help. Your company may have job openings that nobody in the family is actually qualified for. There's nothing wrong with bringing someone else in, even if they don't share your blood relationship. That doesn't take away from being a family business.
8. Have a succession plan
Chances are, if you run a family business, you already have some semblance of a succession plan in mind, even if it's as simple as passing the shop down to Junior. While that's a fine start, you need to get a bit more detailed than that.
A good plan will take into account business goals and objectives, as well as the personnel most qualified to achieve them. Determine which family members will have a say in the future of the company, and make sure all voices are heard and ideas are considered. The more detail you can put into the plan, the better. This may include not only appointing the business owner, but filling other roles as well. Have legal documents drawn up well in advance of any planned transition date. Think of a succession plan as a “will” for your business. Just as an individual should have a will to protect their family, it’s smart to have your plan in place in case it needs to be activated in an emergency. You can always modify documents as circumstances change.
There are many benefits to operating a family business, but a good deal of wisdom is required to keep it running smoothly. For more resources to help your family business, click here to visit Nevada State Bank’s Family Business web page.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.