There is often some confusion around the concept of family business. A lot of people think they have a private business and don’t consider themselves to have a ‘family business’, but there is a big difference between the two.
Family businesses are unique. And when supported accordingly, they have the potential to enjoy success for generations to come. In fact, research shows family owned businesses last longer and survive tough financial times more effectively than private businesses.
Are you a family business?
This is the first question to ask. The answer is straightforward; if your business employs two or more family members and is owned by the family, you are a family business.
So, what’s the big deal? For us at Family Business Central, we think it is a huge deal! Family-owned businesses are the backbone of the New Zealand economy, providing well over 50% of the employment and a seedbed of innovation and entrepreneurship. Despite lasting longer and often performing better than many other businesses, most family-owned businesses in New Zealand do not even acknowledge that’s what they are.
So why do we worry about it? Well, being a family business is a very significant point of difference. Most family businesses don’t realise both the advantages they have and the issues they need to manage.
Even though the original question may seem a bit obvious, if you are a family business, you need to think like one and address the specific issues you face. If you haven’t previously identified as a family business, it’s unlikely you will have embraced the advantages you have, as well as managed the potential risks.
The advantages are indisputable: creating something for current and future generations is an amazing thing to do, and you should take enormous pride in your achievements. The disadvantages? Well, you are combining a potent brew of love and money. When a family business goes under, the smallest loss can have a dramatic impact on relationships.
Managing the risks
The general way to manage this risk is to talk honestly with one another. I heard one farmer comment recently, “Oh, we’ll talk about that later.” No! Talk about this stuff now!
Start with your thoughts and hopes for the future. What are your dreams for your business? What would you like your great grand-daughter to be doing in the business? Discuss this with your nearest and dearest. What are their dreams and what are their worries?
We encourage you to start talking to your kids too, from around the age of 17 onward. Ask if they want to be involved? How do they see their career? What are their dreams?
Not all kids want to be involved in the business and that’s fine, but it is important to have the conversation. When you gain a clear understanding of everyone’s goals it can help you make decisions and ensure everyone is aligned with what’s happening.
It’s equally important to talk to your kids about your will. There should be no surprises! Your will is your final communication to your kids and family, so make sure it tells them how much you love them and that it brings them all together.
You also need to talk about fairness, not just with your partner but with the whole family. Never underestimate just how much your kids are monitoring the current state of ‘fairness’. It’s a big deal and it’s something that needs to be discussed and negotiated. What you might think is fair or unfair, may be completely different to how the kids see it.
Again, have the conversation. You never know what you might learn.
Philip Pryor is a family business advisor and has worked with family businesses for 25 years. He applies his strong business and strategy expertise with a deep knowledge of family psychology, conflict resolution and negotiation to help clients. Contact Phil at firstname.lastname@example.org or on 0274 118 820, or visit: www.familybusinesscentral.com.