Family run businesses are at the core of the American economy, accounting for 54% of the U.S. GDP. However, the unique blend of personal and professional relationships within these businesses can present challenges. For a prosperous and peaceful family-owned business, there are a number of areas that require close attention.
“Family business is one of the greatest assets of the American economy.”
Mike Mirau, The Family Business Manifesto
1. Defining Roles and Responsibilities in Your Family Run Business
When everyone knows their place, purpose, and responsibilities within the business, it minimizes conflict, enhances accountability, and paves the way for a harmonious and productive work environment. This clarity minimizes conflict and fosters a sense of accountability within the team.
“…you need to understand the functions within your business, who fits where, and create a people system that allows everyone to flourish while fulfilling their responsibilities.”
Mike Mirau, The Family Business Manifesto
Misalignment between roles and individuals’ interests or talents can lead to friction and inefficiency. Put the right people in the right positions and you will see an increase in productivity and a decrease in strife.
2. Prioritize Clear Communication
Communication is the glue that holds a family run business together. Regular family meetings dedicated to discussing business matters create a forum for open dialogue and decision-making. Establishing clear communication channels for day-to-day operations helps prevent misunderstandings and conflicts.
“When communication is poor, gossip fills in many of the gaps. Over time, a team can come to live in a “spirit of fear, ” filling those gaps not just with gossip but with negative assumptions about the health of the organization and the security of their own jobs.”
Mike Mirau, The Family Business Manifesto
Poor communication is often the number one problem in dysfunctional teams. Misunderstandings can even result in the loss of valuable employees and relationships. Prioritizing clear and consistent communication will mitigate these risks and foster a positive work environment.
3. Master Financial Management
family run businesses require a keen eye on finances, as the intertwining of personal and business assets can create significant vulnerabilities. Robust financial management safeguards both the family legacy and the company’s future.
Whatever coaching and advice you need in order to understand and manage your finances is well worth the investment. There is no shame in asking for expert help with things like:
- Understanding the fundamentals of revenue and profitability
- Regularly reviewing financial statements
- Managing cash flow effectively
- Planning for long-term sustainability
“A profitable business makes more in revenue than they are spending in expenses. To see how you’re doing, you want to focus on your gross profit and your gross profit margin.”
Mike Mirau, The Family Business Manifesto
By focusing on the RIGHT metrics and striving for a healthy profit margin of 15-20%, you can secure the financial foundation necessary for growth and longevity.
4. Plan for Succession
Family business succession planning is a sensitive but essential aspect of your operations. No one lives forever, and no family remains unchanged through time. Developing a clear plan ensures a smooth transition of leadership to the next generation, minimizing disruption and preserving the family legacy. For a successful transition, identify potential successors early and provide them with the necessary training and experience to succeed.
“Ask yourself if the person you are considering has the competencies to really take the lead. Just because they’re family doesn’t mean they have the characteristics to be a founder.”
Mike Mirau, The Family Business Manifesto
Family ties alone are not enough. Competence is critical if you want to avoid common family run business problems with succession planning. Your next family CEO must possess the drive, skills, and passion to take the company forward.
5. Separate Business and Family Matters
“With the right organization and frameworks in place, you can separate family and business issues so that both can thrive without drama.”
Mike Mirau, The Family Business Manifesto
Natural family dynamics, such as sibling rivalry or parental favoritism, can create problems in a business setting. By implementing structures and frameworks that separate these dynamics from business decisions, you can protect both your family relationships and the success of your company.
Maintaining a clear separation between family matters and business issues supports the well-being of both. Establishing rules and boundaries can prevent personal conflicts from spilling over into the workplace. This helps create a professional environment where decisions are based on merit and business objectives, not emotions.
Family CEOs Helps Address Family Business Problems
By focusing on these five key areas, you can significantly improve the performance and sustainability of your family run business. Remember, it’s about finding the right balance between nurturing family relationships and implementing sound business practices.
If you’re seeking guidance and support in navigating the unique challenges of family business leadership, consider joining a CEO peer group like Family CEOs. Our experienced coaches, confidential environment, and focus on family-specific topics can empower you to build a thriving and enduring family legacy.
Contact us today to learn more about how we can support your journey.
