There are many reasons why building a family business, is appealing. You might want build something with your children, work with family members you know and respect, as well as creating a foundation for generational wealth. There are processes you need to structure to give your children the tools to one day take the reigns of your business.
Challenges in Running a Family Business
It can be tough to draw the line between professional and personal relationships, and that can seriously impact your family dynamic. Communication is essential for the success of your family business. Not expressing something that’s bothering you will only make it fester, and eventually it will come out in a destructive way.
Not having defined roles can create confusion. You also need clearly defined performance goals for each position. Pay each family member a salary rather than letting them take from the till. And avoid giving family members positions simply because they’re related to you.
While you might want to encourage your kids (while they’re young) to want to take over your business, that might not be the best path for them or the business. Some families require children of the owners to go to college and work for someone else at least two years before coming back to work for the family business.
Vet Your Estate Plan Carefully
Barry Banther, Senior Partner at Banther Consulting Corporation, discourages business owners from leaving their children a business in their estate unless they’re sure they will want to take it over, because that will almost always ensure business failure. He offers a better approach to passing down a business, “Create an environment where your children can earn ownership through sweat equity or a cash investment.”
Do the Hard Work Up Front
Family businesses are difficult to run and sustain, given the nature of people. Running a family business can be rewarding, but it requires deliberate planning, training and diligent work on your part as the leader of the business. Put in the effort to make sure there’s effective communication, set boundaries, institute merit-based promotions, and hold everyone accountable. And if you do your business could go on for generations to come.
Source: Emerson, Melinda., June 14, 2017, http://www.huffingtonpost.com/entry/how-to-structure-a-family-business_us_5941c956e4b04c03fa2617ed