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FAMILY BUSINESSES NEED EXTRA CARE!
The family business is an American small business tradition, one that gives parents, spouses, children, and others an opportunity to contribute to and share in a dream that can grow and prosper over many generations.
WHY BE CAUTIOUS?
Without proper planning and management, family businesses can also be the source of contention, acrimony, and even irreparable harm to once-loving relationships. That’s why it’s important for aspiring entrepreneurs to fully understand the pros and cons of going into business with relatives and in-laws. The needs of the business may not always be compatible with family harmony, resulting in a situation that handled improperly, can jeopardize the survival of both.
In business, one always plans for the difficult times not the rosey ones. This is also true of family businesses.
PLAN AND DOCUMENT "BUY-IN" TO AVOID TROUBLE
When bringing family members into a business for the first time, especially as investors or in a startup situation, you should consider putting the business relationship in writing. Family members sometimes buy into the excitement of a business startup without a clear idea of their role once the business is underway.
Consider:
- Attending SCORE's very affordable "How to REALLY Start Your Own Business" course to learn about the skills that are required in a business; try to determine who is qualified to handle each business need. Does your family have the talent?
- Get each family member to document and review their job responsibilities. Review as a family team and feel good about each person's assignment. This is getting "buy-in" while clarifying and verifying the buy-in. If questions or uncertainties arise in the future you have something to help clarify the uncertainties or issues.
- Make sure there is a leader and that you agree to follow the leader's (or leaders') decisions. If the leaders decide that someone is not doing their job, help him/her improve or get him/her to agree that being in the business may not be a good idea (maybe he/she can make more money outside of the business as a simple investor.)
- Get more ideas and help by asking SCORE. We'll help you for free and we are a confidential service that might help prevent trouble...
In an ongoing family business, it’s important to treat family members fairly. While some experts advise against hiring family members, that sacrifices one of the great benefits of a family business. Countless small companies would never have survived without dedicated family members. But avoid favoritism. Pay scales, promotions, work schedules, criticism and praise should be evenhanded between family and non-family employees.
THINGS TO AVOID
Don’t become the employer of last resort for every distant relation who calls. Base employment on the skills or knowledge they can bring to the business. If your kids will be joining the business, make them get at least three to five years business experience elsewhere first to help them gain perspective of how the business world works outside of a family setting.
AVOIDING CONFLICT
Problems and differences of opinion are common in a family business, so it’s important to keep lines of communication clear. Weekly meetings to assess progress, air differences and resolve disputes work well for many family firms.
KEEP THE BUSINESS ALL BUSINESS
Just as solo entrepreneurs and non-related partners need to separate their business and personal lives, owners of family businesses need to prevent work-related issues from dominating family activities. While it may be difficult to totally confine shop-talk to the workplace, make it a standing rule not to discuss work and business issues at social gatherings or at designated “family times” where the focus should be on other things.
GETTING SOME INPUT:
To learn more about operating a successful family business, contact SCORE® in the Cedar Rapids Area. We know the pitfalls and how you can avoid them. Call for an appointment (319-362-6405, extension 2005) or drop in at our office at 2750 First Avenue NE, Cedar Rapids, Iowa, 52402, anytime between 10AM and 3PM.
Our counseling services are FREE and confidential.
ALTERNATIVELY, IF YOU WANT TO LEARN MORE, IT IS AS SIMPLE AS GOING TO: www.scorecr.org
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