Family owned and closely held businesses have many of the same concerns that any other businesses have – including driving and maximizing profits, finding and keeping talented employees and generating increased revenue. However, there are a few challenges that are specific to family businesses, most of which can be classified into two main areas.
The first is the problem of balancing the treatment of employees who are family members with that of non-family members. While the very definition of a family business is that it benefits the family, care must be taken to avoid nepotism concerns. Resentment, and loss of good qualified staff, can arise if it is perceived that family – especially if they are not as well qualified – are given preferential treatment. And yes, the companies that do best in this area go the extra mile to openly follow a fixed set of policies equally for everyone. These policies may include:
- Equal compensation packages for persons doing equivalent jobs
- Set training protocols for everyone entering the company, or doing a specific job
- Universal performance standards and review processes – even for family members
The second major issue concerning family owned businesses relates to succession. Lack of planning in this area can lead to loss of vision, reduced revenues and ultimately, closure of the business. A famous saying in Mexico regarding family owned businesses is this, “Padre noble, hijo rico, nieto probre”. Roughly translated, it means: the father is the founder (who works hard and builds a thriving business), the son is rich (inheriting that successful business), the grandson is poor (inheriting a depleted and bankrupt company from a father who was poorly equipped to run it himself). Succession problems can be avoided with some forethought and planning.
- Find that family member who has similar values and work ethic and groom that person to eventually take over – the goal is thorough training so that the company can run without daily input from the founder
- Plan for and finalize a Succession Plan, a Retirement Plan and an Exit Plan and put them in writing
- Have a professional do a valuation of the business on a regular basis
Any business owner’s goal – whether family-owned or not – should be to have a company that runs like a well-oiled machine; one in which the day-to-day operations are delegated in order to free up the owner’s time to focus on growth. With proper planning and prudent choices, family owned businesses can ensure that they can overcome any inherent difficulties and continue to thrive for generations to come. Getting all the pieces of the puzzle to fit together is a big job and we can certainly help you with any of your business planning needs.