Family-run businesses often have the advantage of a tight-knit, deeply invested management and employee team. That sort of commitment, especially built upon generational heritage, can contribute to an identity and level of service customers value. At the same time, family businesses can face unique challenges, often tied to family dynamics and individual relationships within a larger group.
As a banker, I’ve worked with outstanding family businesses, where a shared bond is a motivating, unifying factor. Yet sometimes, even in close, well-adjusted families, old sibling rivalries or parent-child dynamics can rise to the fore.
As with any enterprise, the success of a family business has a lot to do with planning. It also involves balancing leadership and inclusion. The ideal is to find a path that makes the most of everyone’s strengths, whether your company is well established or relatively young.
Tips to help your family business thrive:
• Make and execute a business plan – Agree to assigned roles and responsibilities, and set clear expectations. This is a chance to consider individuals’ talents and hopes for themselves and the company, and create a strong vision together. Decide what qualifications are needed to be part of the business now and in the future, and determine how profits and losses will be divided. Formalizing agreements when everyone is getting along helps avoid problems and solve issues that may arise.
• Set regular, formal meetings – Meet regularly—and not at the dinner table—to review company operations, finances, goals and opportunities. This can help prevent work topics from creeping into family time and may limit personal topics from interfering at work.
• Keep your financials in order – Maintain high quality accrual and cash-based financial statements and keep a good handle on your debt. Your profit and loss statement (P&L) and balance sheet help you measure profitability and improve performance, and are vital when talking with your banker about opportunities and risks. If you understand your company’s debt, you’ll be better prepared to discuss options for paying it down or planning for increased capacity when it’s time to expand or retool your business.
• Develop a succession plan and revisit it often – Healthy organizations create equal opportunities for people to learn and advance. Individual aptitude and interest play a role too. A child who wants to follow in your footsteps in high school may discover new interests in college, or may not fit the qualifications outlined earlier. A knowledgeable banker can help you understand and structure financing if needed to support your exit strategy.
• Welcome outside expertise – If you need someone proficient in, say, manufacturing or management, consider hiring outside the family, and be sure to treat the employee objectively and fairly. By the same token, a team of trusted outside experts such as an accountant, attorney and banker can help you tackle tough decisions and prepare for the future. Depending on your situation, you may want to consult a counselor specializing in family businesses, enlist an outside board of directors or work with a family business center.
As you navigate the challenges of running a family business, don’t hesitate to contact a banker you trust. Not only can they assist you with cash flow analysis and financial solutions suited to your business, they should provide advice and resources related to organizational structure, succession planning and more. It’s the type of robust service you deserve.