Tuesday, February 13, 2018
It is no secret that each generation of a family owned business faces unique challenges. It is also no secret that the majority of businesses are family owned businesses. Yet, for many, the term family business can conjure up stereotypes of family squabbles, mom and pop shops, nepotism, and lack of sophistication. While there are businesses that fit some (or all) of those stereotypes, it is our experience that these stereotypes are not an accurate description of many family owned businesses. Indeed, we continue to see many family businesses that are thriving, growing, and using their family ownership as a long term competitive advantage.
Keeping the family in the family business is not easy and does not happen by chance. It requires hard work, commitment, and accountability. In our work, we have noticed several themes that are common in successful family businesses. What are some of those themes that help family businesses sustain themselves for the long haul?
1) Retention of both family and non-family talent. Retention is nurtured through a level of trust, commitment to the vision, and strong job knowledge. When a crisis occurs, regardless of prior squabbles, the team pulls together.
2) Wise financial management with patient capital. The family maintains a long-term time horizon utilizing patient capital and minimized debt. This is accomplished with a judicious approach to capital expenditures. Maintaining the concept of frugality allows the family, the business, and the ownership to be ready for the next opportunity and to weather the next downturn.
3) Openness and transparency. The family has a willingness to discuss sensitive issues with transparency and openness. Family members are willing to serve the family and business by frequently placing the needs of the family system, the business system, and the ownership system before their own personal desires.
4) Effective structures. There is commitment to systems, processes, and practices that provide the right structure for their family and business. There is a commitment to educate all family members and shareholders so there are minimal misunderstandings and minimal misaligned expectations.
5) Intentional development. Families in business that are committed to the long haul, consistently and intentionally set aside time to discuss and revisit the first four themes so they can keep up with changes in the family, the business, and the ownership. To implement these themes and subsequently revisit the themes with an unbiased eye, families in it for the long haul utilize unbiased, third party resources.
Well-run family businesses, in it for the long haul, stay focused on the things that will help them navigate the ever-changing challenges that they face.
For more information contact SKM Associates Family Business Consultants