In the beginning, a family business sounds like a sensible idea. One family member can tend to the books while another takes charge of marketing and sales. And it may all run like clockwork—for a while.
But what if the company grows and the accounting responsibilities exceed a family member’s capabilities? What if someone doesn’t agree with the direction the company is headed, or a divorce, illness or death upsets the company’s equilibrium? Consider the following steps to make sure that the family business doesn’t wreak havoc on the family:
- Look outside the family for objectivity. It is better to identify a team of “neutral” advisors outside of the family who you can trust for impartial advice when you’re facing important business decisions. This group can include a variety of professionals; an attorney, an accountant and a banker make a good start.
- Hold relatives accountable. Set goals for each family member—whether they relate to sales, profits or implementing IT systems. Family members should also participate in regular discussions of the company’s future.
- Know your limits. Develop a business plan as a family—and include your banker and other advisors in that process. Your banker can help you understand the amount of debt you can take on and guide you toward the financial vehicles and solutions that best fit your company’s circumstances.
- Begin training the next generation of leaders sooner, rather than later. It’s important to have a formal plan in place to identify and train family members for their future roles. It’s also another reason why you’ll want non-family members on your board of directors; they can help ensure that the most qualified family members are chosen to lead.
- Put agreements in writing. Succession and contingency plans—including obtaining insurance and establishing buy-sell agreements—today can help eliminate power struggles down the road should the unexpected happen.
- Be flexible. Sometimes the best way to ensure a family business’ longevity is to recognize and respect your family members’ interests and limitations, and to identify leaders with the fortitude to follow a business’ long-term vision.
Such decisions can be difficult. In the long run, what’s best for the company is also often what’s best for the family as well. iBi
