Pitfalls to avoid when expanding the family business
Q: I run a successful family business and am looking to bring other family members into the business, can you advise me on what pitfalls to avoid?
A: Keeping your business in the family has obvious appeal, whether you work with siblings, parents or children. Your family will stick with you through the hard times. You know your family well, and you and your family often share common goals. Working with family can be emotionally rewarding and satisfying
But working with family can also get complicated. Family businesses can lead to emotional stress and arguments. They can even cause legal & financial disputes. So if you're thinking of expanding your business while keeping it in the family, it pays to plan ahead.
Interviewing interested family members: You should always take the hiring process seriously. Interview each applicant - family and non-family to find out what they can bring to your business. In particular, look for skills and experience that are different to your own. You're less likely to argue if you have complementary abilities. Make sure you create opportunities for people who have worked outside the family firm to contribute their fresh perspective and new ideas.
Be fair to all your employees: Before you think about hiring more family members, spare a thought for those employees who are outside the family. As the business owner, you have a duty to be fair to all of your employees - not just your relatives.
- Leave emotion out of your employment decisions
- Consider whether the family member will fit in well
- Don't show favouritism to anyone
- Introduce fair salary remuneration packages for all positions
- Promote your best people, whoever they are
- Set clear expectations with everyone
If you want your business to thrive, you need to be as strict with your family as you would be with any other employee. Regardless of the size of your family business, unproductive workers can hurt its efficiency and reputation.
Keep emotion out of the family business: A family firm is dominated by two strong forces: emotions and finance. Unfortunately, these can sometimes pull in opposite directions. You may find yourself on the other side of a business argument to someone you dearly love, which can be stressful and awkward. There's no easy answer. But business decisions taken for emotional reasons rarely work out well.
Stay firm on finances: A family business must be run with the same level of financial responsibility as any other. You will need to hold family members accountable for bringing in revenue or keeping expenses down. It can be difficult to do this with a close relative. The best way to keep emotions from creeping in is to use key performance indicators to monitor performance so everyone knows what to expect.
Your accountant or external tax advisor can help you manage finances in a family business. They will help you make impartial decisions and explain the tax implications of your decisions.
Be fair to your children: Poor inheritance planning causes resentment and also may have serious tax implications. Talk to your accountant or tax advisor for advice in relation to the tax implications of succession and handing over assets or the business.
For further information on growing your family business, contact Jim Doyle on 053 9170507 or email firstname.lastname@example.org