Family businesses are fantastic things, aren’t they? We all know one and we just love supporting them, whether it’s the restaurant down the road or a small services business.

Many of you reading this are busy building a family business as we speak! The journey is tough, with the dinner table inevitably becoming a business meeting as well. But if you aren’t careful, a family business can end up doing more harm than good in your life.

Thankfully, there are ways to avoid that happening. They just require a lot of discipline.

Below are a few ideas to help along the way.

This may sound like a scene from a mafia movie, but there’s a very important message in here: business matters must be treated as business matters, not family matters. This is where things get very tough, as family members don’t always understand that they need to have an arm’s length relationship with the business.

If someone is “working” in the business rather than actually working on the business, things generally end badly for everyone involved. The people pulling their weight start to feel resentment and the ones being given a free ride aren’t developing the necessary skills for the real world. Everyone is being done a disservice.

Regardless of whether the person working in the business is a family member or not, there needs to be proper accountability. Get the right Key Performance Indicators (KPIs) in place and define the role as clearly as possible.

Perhaps the best approach is to imagine if you were advertising that role on a job portal. How would you describe it, what would the responsibilities be and what would the remuneration package need to look like?

Then ask yourself why it should be any different simply because a blood relative is in that role.

If family members aren’t working in the business full time, that doesn’t mean they don’t have a lot to add. If there’s a great brand strategist in the family, why not get that person involved and improve the brand? Of course, to avoid breaking the number one rule when mixing business and family, a market-related payment should be involved.

Likewise, if there’s an excellent financial strategist hanging around at the family lunch, don’t be shy to use those skills, especially if that strategist has an in-depth understanding of not just the business, but the people involved as well.

Trying to create a full-time position to help someone in the family is a terrible idea. But taking advantage of genuinely marketable skills in the same way as an unrelated client would do is a smart idea, as it keeps things in the family without sacrificing quality.

Things change in families. People get married and might have kids. People get divorced. Health scares never seem to be far away. People burn out or get tired or feel a deep need to travel instead. Humans are fascinating creatures and this creates a recipe for volatility in any business. The situation is even worse in family businesses, where broader family matters inevitably have an impact on the business.

It’s impossible to plan for every possible outcome. Instead, focus on creating optionality for yourself and the family by ensuring that the business is ready to sell if a buyer arrives or if something major changes in the family.

As we always say, running a business as though you’re about to sell it will almost certainly create a better business along the way. You’ll be focused on getting the basics right and ensuring that there’s a succession plan in place as well. Remember, a buyer would need to be convinced that the business can be separated from the family, so be sure to keep that in mind when building and business and determining the involvement of each family member.

The way to avoid potentially bitter conflict in a family is to create alignment and a sense of understanding around the decisions being made. Tough love might be needed in some circumstances, but then it’s better to get it out the way sooner rather than later.

In most cases, open communication and clarity will avoid major problems now and in the future.

Aside from our online valuation and exit planning options, we offer consulting services to businesses seeking to gain a deeper understanding of their strategic options and how this would influence the value.

If you believe that you have needs that won’t fully be captured in a bizval live online valuation, then consider a bizval concierge (includes two hours of consultation time) or bizval exit (includes four hours of consultation time).

It could be the best investment you ever make in your business.

Let’s talk

Thanks for giving us your time to read this. If you want to use some of our time to discuss your exit planning or valuation needs, why not book a discovery call with us?

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Happy building!

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