Pointers to Running a Family Owned Business

Written by Liz Kudwa

A: This is a great question! Lots of businesses begin as a family endeavor and certain issues should be considered before starting your own family business. An article from the editor of www.entrepreneur.com, Karen Spaeder, addresses some of these issues.

The key thing to keep in mind is that family "systems" and business practices do not go hand in hand. The quarrels that Dad and his son have over who drank the last of the milk have no place in a business. (Would you ever argue about milk with your boss?) Statistically speaking, most family businesses do not fail because of a business reason. It’s the family baggage that weighs them down and eventually kills the business.

Essentially, each family member must be prepared to behave in his or her role exactly as they would in a traditional office setting. Cold as it may sound, the business must come first if you want to be successful. You can call one another whatever you like as far as titles go, but the important thing is that each role is well-defined and you all respect one another’s boundaries. For instance, an employee-daughter should not be asking a CEO-dad to "take care of" this or that because she has a softball game that afternoon, and vice versa.

While there are clearly some possible disadvantages to operating a family business, there can also be advantages. Family members are often fiercely committed to making the business succeed–everyone is a strong link, because everyone has a stake in seeing that the business prospers. In addition, family members are often sensitive to one another’s needs. While it’s certainly wise to keep personal matters out of the business, this rule doesn’t always work. If someone has a major crisis, other family members can respond accordingly, taking on that person’s work for the day or just taking time to talk it out. Business comes first, yes, but not at the expense of any family member’s well-being.

So before you start your family business, take the time to work out all the details. Do some brainstorming together to decide what type of business you might like to start together–one that will augment everyone’s talents and pool them in such a way that your business can grow for years to come. And make sure all parties are aware of the unique risks and rewards associated with family business.

The Capital Area District Library also has books that may be of interest to owners of family businesses.

Perpetuating The Family Business: 50 Lessons Learned From Long-Lasting, Successful Families In Business by John L. Ward John L. Ward, a leading world expert on family business, offers the best practices of the most successful and long-lasting families in business, including Ford Motors, Marriott Hotels, Levi-Strauss, and the New York Times. He provides a framework of five insights and four principles in which to position his fifty "lessons learned" for family business longevity. This is a comprehensive book on sustaining family businesses that contains international examples, cases, essential tools, and checklists of best practices; a how-to every entrepreneur should have. (Palgrave Macmillan)

Managing For The Long Run : Lessons In Competitive Advantage From Great Family Businesses by Danny Miller, Isabelle Le Breton-Miller Fidelity, Hallmark, Michelin, and Wal-Mart are renowned industry powerhouses with long leadership track records. Yet these celebrated companies are united by another factor not generally equated with competitive success: They are all family-controlled businesses. While many view the hallmarks of family businesses-stable strategies, clan cultures, and unencumbered family ownership-as weaknesses, Danny Miller and Isabelle Le Breton-Miller argue that it is these very characteristics that create formidable competitive advantages for many such firms.

Managing for the Long Run draws from a worldwide study of enduring, family-run organizations-including Cargill, Timken, L.L. Bean, The New York Times, and IKEA-to reveal their unconventional success strategies and how these strategies can be adopted and applied in any organization. Miller and Le Breton-Miller show how four driving passions of family-run firms-command, continuity, community, and connection-give rise to a set of practices that defy modern management thinking yet ensure a company’s long-term competitive advantage. Outlining how these practices can enhance strategic efforts from operations to brand leadership to innovation, this book shows what every company must do to manage for the long run. (Harvard Business School Publishing)

Sustaining The Family Business: An Insider’s Guide To Managing Across Generations by Marshall B. Paisner. A practical guide to successful management-today and tomorrow-of the family business, from one of its most innovative and outspoken proponents. From the local dry cleaner to the nation’s largest breweries, family businesses make up 90 percent of the fifteen million businesses in the United States. Yet only one-third make it to the second generation, and 10 percent to the third, because owners-tempted by lucrative offers-cash in to ensure the financial security of their children. In Sustaining the Family Business, Marshall Paisner celebrates the unique qualities of the family business, and offers a comprehensive resource for successfully managing the enterprise across generations. Drawing from his own extensive experience, new primary research, and examples of family businesses in a wide range of industries, Paisner offers practical recommendations for handling conflict, establishing professional management structures, setting long-term goals, developing tax and estate strategies, and preparing heirs to take the reins. (Perseus Publishing)

As for starting a business with your spouse, Entrepreneur.com also has some tips to offer. In an article by Rosalind Resnick entitled "Starting A Business With Your Spouse" she suggests five tips to help you navigate a business partnership with your spouse. A summarized version appears below.

1. Divide your roles and responsibilities. Even though both of you may possess the skills to do the work and serve your clients, it’s important to divvy up your company’s roles and responsibilities so that you don’t step on each other’s toes.

2. Develop an effective way of airing differences and resolving disputes. While good communication is essential to any marriage, it’s just as important in a business relationship. A couple who can’t compromise on minor issues such as what kind of printer to buy is going to have difficulty resolving the many problems that will inevitably crop up as the business grows.

3. Put a child-care plan in place. Just because you’ll be working from home now doesn’t mean that you don’t need daycare or babysitting-quite the opposite! If kids are running through your home office demanding attention, you’re not going to be able to get much work done.

4. Make sure both of you have enough room to work. Some people have no problem working in a noisy office with lots of commotion, and others need quiet and privacy in order to concentrate. If this is true for you and your spouse make sure there are two separate spaces for work.

5. Agree on an exit strategy before you begin. While it’s hard to think about the company’s future before you’ve even launched it, it’s important to sit down with your spouse and decide where you want the business to go. While it may not be necessary to have a lawyer draft a formal shareholders’ agreement with buyout provisions and the like, it’s a good idea for you and your spouse to agree on an annual budget and make a list of common goals and objectives.

Liz Kudwa
Business Reference Librarian

Capital Area District Library
401 S. Capitol Avenue Lansing, MI 48933