How to Make Your Family Business Endure for the Next Generation

A business run by family comes with enormous benefits – and quite a few extra challenges. The love and dedication that makes your family go the extra mile for the business can also confuse roles, make decisions harder, and lead to bitterness and resentment. 

However, done well, a family business can often prove to be more successful and more enduring that its traditional business competitors. Think about Nike, Tata, Samsung, Oracle and Novartis – all multi-million-dollar companies and all family-owned. But why is it that family businesses can be so successful?

Employees feel committed

Once you work in your family’s business, you’re there to stay. Statistics show that family members who are involved in the family firm are secure in their roles, and as a result, stay in the business. It also means your employees feel responsible for it, and care about the outcomes of the decisions they make. It’s more than just a business – it’s personal. When people care about the decisions they make, they’re far better thought out and have positive outcomes for the entire business. This mix of long-term understanding and real ownership from employees is hardly ever enjoyed by traditional businesses.

More trust means more agility

When your company is built by people who love it as much as you do, you trust them. This means your employees, and therefore your business, can take more risks. When there’s a chance to make a positive change, or a new idea to implement, it can be actioned immediately – no need to wait for the management hierarchy to get in line. Your business can do away with the red tape that traditional companies need, stay more agile, innovate and take opportunities quickly, while competitors dither.

And for more serious decisions, the business leaders are all seated at the dinner table – it’s a board meeting with roast lamb and a glass of wine.

Family atmosphere, greater loyalty

Family businesses tend to have a family atmosphere that can positively affect everyone in it. Staff feel like family, even if they’re not, and stay longer in the business. That means employees with more commitment and better work ethic, and less expense for the business in retraining new staff. If there is a change in direction or a downturn, family businesses will tend to make the effort to avoid layoffs. This can make it trickier in the short term, but does tend to increase that feeling of loyalty, and keep valuable skills and knowledge in-house.

This family atmosphere extends to suppliers and contractors. It results in loyal, long-standing relationships that bring repeat business, and the kind of industry insight that can’t be bought.

More motivation for quality

The reputation of a family business reflects on the family name. That means a family business will work harder to deliver quality, because it’s not just the business, but family pride at stake.

How to ensure your family business is a success

Even with all these advantages, success isn’t a forgone conclusion. Family businesses bring with them their own set of unique pressures too. The business still needs to operate with competitive efficiency, while also considering the feelings and dynamics of the family. Here are some must-dos to make sure your family business is one that lasts. 

Business and family goals need to be aligned

A business is there to make money – and this may not be aligned with the needs of family members. And when family needs overwhelm business priorities (or vice versa), that’s when things begin to go wrong. For example, while family members need to develop and nurture their own skills, if this isn’t in the best interest of the business, it can hold everyone back.

There’s no easy answer to this. A balance needs to be maintained between looking after family members, and making decisions that are best for the longevity and profitability of the business. Open dialogue and good family dynamics are crucial to assessing the direction of the company. External support can help immeasurably too, especially if conflict has started to emerge. 

Get clear on rules, guidelines and responsibilities

In every other business, clear rules and guidelines are needed to manage the roles and responsibilities of staff. Family businesses, however, often rely on relationships to get through the day – roles are often not well defined, and rules are circumvented (because it feels like, perhaps, they shouldn’t apply). For a family business to grow, it needs to be structured and run like a traditional business. This clearer structure can also help reduce the chance of personal resentment creeping in. Again, external advice is worthwhile here – having a third party help you define the rules can make the process feel fairer and more objective.

Commit to the straight and narrow

As a family business, it can be tempting to ignore legislation or industry rules – you can all be in on it to avoid paying tax, or to get around the employment laws, for example.

Similarly, you may find your particular industry has certain ethical standards which help avoid favouritism and bias.

As with any underhanded dealing, the truth will always come out, which could have far reaching effects. It’s also important to remember that your business is setting an example for your children. So, for the sake of your investment and your family, any rules and regulations should be followed to the letter.

Run the business like a real business

Your successful family business should be run like any other, with rules, guidelines and risk management. That means starting with a firm business plan, strategy and operational rules. But that’s not where you should stop. Your family business must be constantly assessing whether it has the right balance between hard-hitting business matters, and care for the family.

You may never get it perfect, but it’s that consistent focus – ideally with external advice – that will allow you to make the most of those unique family business advantages.