Keep it in the Family!

Many people start their own businesses to get a better lifestyle and for some, that involves working with member of their immediate family, husband and wife, father and son mother and daughter etc.  And why not?  After all, owning your own business can be a lonely affair, so what better antidote than having the people that otherwise you would not see because of work with you everyday.

The upsides of having a close family business are normally well defined: working with people you know and trust, spending more time with the ones you love, even using complimentary skills that you know and understand. 

However, with all family businesses, there are as many if not more inherent dangers than in a regular business that has no family members working in it.

Lets start with the bare statistics: 80% of start up businesses fail in the first 5 years.  As far as I am aware, there are no statistics showing that family businesses are any less or more successful than this.  However, in my experience, family run businesses do seem to have a knack for lasting longer than other similar businesses.  I put this down to two distinct factors:

1) There is strength in numbers; it can be lonely running a business and if there is only you it is easier to give up than if there are two or more of you.

2) There is no alternative; if the business does not survive then it is like saying the relationship is over!

I have come across some very sad cases of this latter circumstance.  One couple had been in business together for 10 years and made an average of £10,000 between them each of those years.  They had survived by consistently remortgaging their house and borrowing in the hope that they could turn the business around.  If they had not been in the business together, I am sure the spouse who was not involved in the business would have put a stop to it long ago. 

The key to avoiding this is to have an open and honest discussion before starting the business to decide where the business is going, and what should happen if the plans do not come to fruition.  Ensure you have somebody outside of the relationship with who will give you a reality check from time to time.

The next problem that all family businesses run into at some time is recruiting people because they are family, not because they are best suited for the job.  The key to building a great team is to recruit based on attitude and train for skills.  Nobody is 100% perfect for a role in any company and one of the biggest issues for many businesses is getting the right fit of people into the organisation.  Family members seem a very attractive option at first, because you know them and the cultural fit should be spot on.  However, most people see their family through “rose tinted glasses” and think that because they are family, they will fit right in.  This is especially true when employing your offspring.  Most parents see their kids as a “chip off the old block” and believe that they will think and act the same as the parents, when the reality is often the opposite. 

To overcome this issue, don’t assume that you know your family members as well as you think you do!  For each role you are recruiting for, have a clear job specification and person profile, carry out an interview and behavioural profile as you would normally do.  It can often be useful to have somebody external to help you with the recruitment process to help to keep it impartial, or to do it on your behalf.  Ensure that you are both clear where there is fit with the role requirements and what areas will require development over time.

Once the family have had a bit of time working together and the business is out of its start-up phase, the next area that causes issues is the lines of communication.  The biggest misconception in business is that because people work together and see each other every day, that they successfully communicate with each other.  Now add in the factor that families tend to spend time with each other outside of the business as well and the misconception is doubled.

Husband and wife teams are the worst at this.  They always assume that the other knows what is going on because they are around when these items are talked about, when in fact “real communication is the response you get”.  And remember that to assume is to “make an ass out of you and me”.

The best way to ensure that you have real communication is to have regular and purposeful meetings.  These need to be booked into the diary, have a clear agenda and notes taken of the resulting agreed actions taken and these need to be followed up.  If the meetings have to take place in personal time, then make sure you keep business short and sweet and that all parties agree.

The final area that family businesses struggle with is roles and responsibilities and ultimately succession planning.   This will normally be more of a problem where one of the family (normally Dad) is either overtly dominating or passive.  Remember the old adage that the first generation starts it, the second builds it and the third destroys it.

The worse case I have encountered of this was a dominant father who ruled with a fist of iron and his son, now 50, was a shy timid character.  Dad was frustrated that his son was never going to step up to run the company as he wanted it run and therefore blamed the son for not allowing him to retire. 

To overcome this, all parties need alignment for their business and personal goals.  Remember that a business is purely there to give you what you want in life personally; it is the vehicle not the destination.  There should then be a clear organisation chart and roles and responsibilities with a obvious progression path for all members, including the founder.

So now you know how to avoid the family business pitfalls, get into ACTION and start building the legacy!

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