Just over 70 per cent of small to medium enterprises (SMEs) in the UK describe themselves as a family business. Started out by father and son, or husband and wife, at first sight it seems like an ideal solution to finding a great business partner, but working with your nearest and dearest isn’t without its pitfalls.
Family-run companies need more discipline, agreement and planning, as well as the recognition that family ties are forever and have to come before money.
If you’re thinking of starting a family business, or are already running one, you might find these tips really handy as you make your way across what can be a tightrope and a minefield all at once.
There has to be one leader whose “say” is final
Committees of relatives don’t lead companies very well, as they can argue over minor points and decisions and suddenly deep resentments from childhood come to the fore and derail everything.
Choose one person who holds sway to make the final decision. This person might not always be the most popular all the time, but he or she will keep things moving and stop the rest of the family bickering.
Everyone could take a turn annually, to make things even fairer. The Reuben Singh Family Office is a good example of a long-running family enterprise, in which the different ambitions and personalities of the members is made a priority.
Avoid gentlemen’s agreements
It’s easy to think that a handshake with your cousin is as good as a formal contract, but it’s actually worse than a verbal agreement with a non-relative because there’s so much more room for wriggling out, misinterpretations (deliberate or not) and welching. Worst of all, you have to see each other over the Christmas table.
Everything should be in black and white and signed. Job descriptions, dividend payouts, holiday allowances – everything must be documented and agreed on before the family business starts.
Keep criticism constructive
No-one likes criticism, but when it comes from your younger sister…ouch.
It’s hard to separate the real, valid points from the suspicion that she’s simply settling a score from 1992. Making the points in a positive, fair and workable manner means there’s less chance of a blow-up.
Everyone needs to understand that if a business is to grow and thrive, constructive criticism is essential. It must, however, be delivered in a mature and professional way. Standards must be clearly defined and the reasons why someone isn’t meeting them, as well as suggestions about how they can meet them, must be explained.
Look outside the Family Business label sometimes
Within the family you may all share the same outlook. You’re running a business with people who are almost certainly from the same culture, with the same emotional and psychological modelling and the same education. Having a similar outlook is, in the main, a great thing, as you’ll tend to agree on many things, but sometimes it can lead to a blinkered approach that can shut out new opinions and fresh viewpoints. Listen to others, hire people from outside the family, talk to customers and take on board their feedback.
Do you run a family business? Please comment below with any hints or tips that you have for new starters, or tell us a funny story from your business …