A family owned business is generally defined as one where multiple members of the same family are majority owners in the firm, whether they are actively involved in day-to-day operations or not. Family owned business makes up at least half of all businesses in the United States, and generate nearly two-thirds of our GDP! On top of all that, they employ more than half of all workers.
According to research compiled by Tharawat Magazine, globally family owned businesses show higher profitability in the long run, are less likely to lay people off and more likely to hire despite the possibility of an economic downturn, and are less likely to raise debt. They are highly motivated to create a legacy for generations to come, and are more likely to give charitably in their respective communities.
Family Owned Business Faces Unique Challenges
Family owned business faces unique challenges, however, that many non-family business don’t deal with at the same level. A family business is greatly affected by family problems, and it can be difficult to separate family and business. Often the boardroom is the same as the kitchen table, both literally and figuratively, and that brings emotions into the mix.
The success rate of multi-generation family businesses drops dramatically after the second generation, and this is often due to poor strategic planning, lack of clearly defined roles, and assuming family members are the best choice to lead.
Familial relationships cause businesses to overlook the need for clear policies and business norms, and the business can suffer from a lack of outside opinions and diversity on how to operate the business.
Often there is no written or agreed strategy for the long-term, roles are not clearly defined, and there is confusion and tension regarding compensation. Most have no succession plan in place, which leads to political and personal conflicts.
These are just a sampling of a number of issues and challenges that family owned businesses face, and it is critical that business owners recognize the need for outside expertise and guidance when attempting to address them.
Family Owned Business – How I Can Help
As a business coach, many of my clients have been family owned business, and I’ve seen the results of years of managing the business by traditional familial means, rather than sound management practices. As I set out to help them, there are several key areas that I focus on.
Once I fully understand the current situation, the players and their roles, ownership, management and operational styles, I take the owner(s) through a process of clearly identifying what they want for the future of the business. Getting answers that everyone can agree to is a challenging first step, for most of the time there are differing visions of what the future looks like, and the team operates as though they are in agreement already. This process brings those differences out so they can be dealt with in a constructive way. The goal is to create a vision that truly captures the heart of what the owners (and potential future owners!) want from and for the family owned business.
My role includes facilitator, peacemaker, and referee, with a little therapist thrown in.
The creation of this vision allows us to then answer the question of how that vision will be created, and when. Most small business owners are eager to jump into action, often without sufficient preparation and thought beforehand. Evaluating what will be required to reach their goals, using facts not assumptions or emotions, helps the team to remain balanced and focused. We look at what roles are necessary, and who is best able to fill them, and create clear definitions for each member of the team.
I help the business create (or update) their marketing plan, increasing their focus on their ideal customers, so that marketing and advertising expenditures are more clearly aimed and have proper expectations set. Advertising tends to be ‘fire, ready, aim’, resulting in wasted dollars on tactics that don’t create the best results. A good marketing plan helps to maximize the impact of each campaign, measure the results, and improve going forward.
Family Owned Business Succession Planning
Parallel to this planning process, I help the owners of the family owned business address the succession and exit plans. Most of the time this is not formally established, resulting in confusion, hurt feelings, and questions about the future. More than anything else, simply knowing how the leadership and management of the business will evolve goes a long way towards building a stronger team.
A third key component involves the internal processes and systems that are so critical for efficiency and growth. Much of the time existing processes are ‘tribal’, meaning they are created out of necessity and agreed to verbally and by assumption. I help the team identify the key processes the business depends on and ensure they are documented, improved upon, and implemented. Since systems run the business, I teach the owners how to run the systems and create those that will scale for the growth they want.
My goals when working with a family business are to eliminate confusion and uncertainty with clearly defined goals, strategies, and roles, so the owners can focus their efforts on building a solid business with high value.