APPRENTICE TIPS : Successful family-owned business

Building a family business and passing it on to children can be enormously rewarding. However, they present particular ownership and management challenges.

Planning ahead and involving family members is essential to achieve business and personal objectives, make the most of the family strengths and minimise the risk of disputes. In a family business, business disputes can quickly become personal and can later on impact the business.

Retaining family ownership and control is a prime objective for many family businesses. However, it may limit growth potential. Passing the business on to the next generation can be very challenging and troublesome.

Tax efficiency is usually a major concern, particularly in terms of potential inheritance tax liabilities. As with other tax matters, forward planning is essential.

Another potential problem is that family-run businesses can become inward-looking or self-satisfied. Non-family employees may legitimately resent discrimination in favour of family members, particularly if those family members have little relevant experience. Even where the owners have identified the need to bring in new talent with fresh ideas and skills, it can be difficult to attract and retain outsiders who may be concerned at the family’s influence and believe – rightly or wrongly – that they will have limited opportunity to contribute to the future direction of the company.

While building a family business can secure the family’s financial future, it can also bring an intolerable degree of financial risk. These risks can be particularly acute when personal financial assets are concentrated in the family-owned business or the owner has given personal guarantees for business debts.

Reference to the above narrated issues; I can now give some recommendations to be considered so as to ensure the success of family businesses. First and foremost, as a business owner do not always consider dealing with the family first to ensure business success. The top priority is to ensure that the business is functioning correctly and growing. If you do not take care of the business, the business will never take care of the family.

Also it is imperative to set boundaries to limit business discussions outside working hours. Mixing business, personal and home life can lead to conflict that is disadvantageous to business success.

It is imperative to involve family members in business meetings and their contributions are given equal weight. This helps to focus the attention on the core business objectives.

The business killing monster is “sympathy syndrome”!! Do not provide ‘sympathy’ jobs for family members. Professionalism!! Competence!! Commitment to business!! It is important that each member of the family adds value to the business and works at a level that is aligned with their skill base.

Clearly define each family member’s role and put this in writing, such as an employment contract. This should be dealt with like any other business relationship.

It is also imperative that those family members who want to join the club have suitable outside experience first as this will help them to gain valuable knowledge of how business works outside the family business environment and bring new insights and ideas when they join.

As a family business owner, it is not sin to seek for outside advice. Family businesses at times can be too closed and seeking outside advice can help to bring fresh ideas and facilitate creative thinking. Outside facilitators can also help to make the working relationships of family members more productive. Non-executive directors can provide a fresh view and outlook.

Treat family members fairly. Family members tend to have an affiliation and affection for the business. This means that they have an energy and enthusiasm for the success of the business that previous generations have spent years building. It is important, though, to ensure that there is no favoritism. Pay levels, progression, expectations, criticism and praise should be even-handed across family and non-family employees. Remember not to set standards higher or lower for family members than for other members of staff.

Understand the advantages of family ownership and use them as a positive in marketing. Customers are very often drawn to using family businesses because of their culture and togetherness.

By Julius Landu Bulili – M.Sc. (Economics &Econometrics); CPM, S.A email: [email protected] or [email protected]