You might think that family-owned businesses have a natural advantage. They do – but keeping both the family and the business happy requires effort and careful management.
The Melting Pot of Emotion
Family-owned businesses often find themselves entangled in a web of emotions including
- Old Wounds: unresolved issues and misunderstandings among family members can resurface, causing tension.
- Feeling Undervalued: a family member may feel their contributions are not adequately recognized.
- Sibling Rivalry: competition among siblings.
Balancing Business and Family Issues
Running a family business involves juggling both professional and personal issues. Key issues that have to be addressed include:
- Entitlement: who is entitled to what within the business?
- Founder’s Role: wat role will the founder play as the business evolves?
- In-Laws: should in-laws be involved in the business?
- Shares:
- Who will own shares?
- Who gets dividends?
- Should shares stay within the bloodline?
Contingency Planning
Planning for the ‘what ifs’:
- Selling Shares: what if a family shareholder wants to sell shares to an outsider or gift them to a partner?
- Divorce: what if a family shareholder divorces, what happens to the shares?
Clarity and Fairness
Whether the founder or one of the adult children, clarity and fairness are essential. This requires:
- Management Framework:
- Establish clear roles and responsibilities.
- Create policies for ownership and succession.
- Documentation:
- Think through, document, and file away agreements for future use.
Final Thoughts
Family-owned businesses have the potential to be incredibly successful. However, they require careful planning and a framework that supports both the business and family members. These are delicate matters that need to be handled with fairness, transparency, and pragmatism.
I am always available for an informal discussion, free of charge and without obligation, to help address these critical issues.