How to Master Family Business Management
Did you know that only about 30% of family businesses make it to the second generation, and just 3%-5% make it to the fourth? The main reason is often not understanding the importance of family business management. In this article, we share the top tips to help a family-run business succeed.
Family Business Management Tips
When you think about how to manage a family business, you might feel unsure of where to start. Like any other business, there are some important tips that you will need to follow for steady growth. Here are some of the family business management tips you should adopt:
Define Clear Roles and Responsibilities
The first step in running a family business is making sure everyone knows what they’re responsible for. To keep things running smoothly, every person involved in the business should be assigned a role based on individual strengths, not just their family role.
The best way to do this is to create a formal structure where each family member has a specific job description. This way, there will be no overlap in responsibilities, and everyone will be able to focus on their duty. It will also help in preventing any misunderstanding or conflict.
Keep Business and Family Separate
A common challenge for family businesses is managing the line between personal and professional life. In around 60% of cases, problems in family businesses arise due to personal conflicts, which then lead to a loss of control and serious emotional issues, especially between the first and third generations.
To avoid these problems, you should separate your business and family matters from the first working day. Family bonds are important, but business decisions should focus on what is best for the company, not personal feelings or family dynamics.
Create a Fair Profit Sharing Plan
In family business management, one of the most critical aspects that you should immediately do is to have a fair way to divide profits. When everyone knows how the profits will be shared, it will keep things fair, reduce tensions, and avoid any future conflicts. Conflicts will happen if the business is not handled properly.
Getting help from a family business management consulting firm can help you, especially if you want to make sure that everything you are setting up and the profit-sharing system is fair and clear.
Establish Legal Business Contracts
Having legal business contracts in place is very important for family business management. These contracts will help set clear terms for ownership, roles, and responsibilities with a legal bond in place.
When you formalize agreements, you protect the business and avoid any possible misunderstandings that could cause failures later on. The smartest move is to involve a lawyer specializing in the family business and knowing how to write a solid business contract, as this will make everything legally bound.
Resolve Conflicts with Fairness
Conflicts are bound to happen in any business, especially a family business but the important thing to do is to handle them fairly. Leadership development is what will play a big role in resolving any conflict, and this is why a leader should be selected based on skill sets.
In addition, every family member should master leadership. When everyone can calmly handle challenges, resolving conflicts will be much easier and help the business grow steadily.
Conclusion
Family business management might seem full of advantages at first, but there are also numerous challenges that come with working alongside family. Following the tips discussed above will help you manage a family business much more effectively and eventually build a business that would work well for both the family and the company.
