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2019-06-05 20:48:09How To Run Your BusinessEnglishSome small business owners deal with power struggles between family members while others contend with how to stay on the same page and...https://quickbooks.intuit.com/au/resources/au_qrc/uploads/2019/06/Small_business_family_drama.jpghttps://quickbooks.intuit.com/au/resources/how-to-run-your-business/how-to-run-a-family-owned-small-business-without-the-drama/How To Run A Family-Owned Business Without The Drama | QuickBooks Australa

How to run a family-owned small business without the drama

5 min read

Did you know roughly 70% of Australian businesses are family owned?

According to research from Macquarie and Family Business Australia the impact family-run businesses have on the Australian economy is staggering:

  • There are more than 1.5 million family businesses in Australia (around 70%)
  • Family-run businesses have an average annual turnover of $12 million per year
  • The average number of people employed by each family-run business is 37.

While family-owned businesses fuel local and global economies, they also have a tendency to fuel complicated emotions.

To get a sense of just how complicated these emotions can be, we conducted an informal poll with a group of small business owners on Facebook to learn about their family business drama and received some interesting feedback. (Answers have been anonymised to protect the identities of the respondents.)

Family drama and small businesses

Some small business owners deal with power struggles between family members while others contend with how to stay on the same page and treat everyone in the family business fairly. Alarmingly, only 48% of these family-run businesses have a formal board structure.

There’s also the matter of employees not effectively doing their jobs. One small business owner said: “The biggest drama would be that positions and roles can sometimes be neglected and anyone thinks they’re the new boss.”

Many who run a family business have a difficult time differentiating between business and family matters. Family Business Australia’s research lists balancing business and family matters as their number 1 concern. According to one small business owner, “We try to make a rule that there’s no business talk at home. If we do, there’s a set day and time to do so. It’s hard.”

Another respondent commented, “The biggest struggle I have seen with family business is the inability to shift roles. In the workplace, your position is much different than in the home, and in many cases, this needs to be made clear.”

When you run a family business, it’s also hard to clock out for the day. One small business owner noted, “I have a hard time leaving work for the day. I’m still figuring out a good balance.”

Do you share some of these sentiments? Check out these tips for running your family business with the drama.

Communicate clearly and openly

Good communication is critical to the success of any small business.

Don’t assume that just because they’re family, everyone understands your expectations.

Aim to frequently communicate with your team within and outside the family business to help reduce miscommunication, build trust, establish the values of your small business, and ensure everyone understands future goals.

Weekly meetings are a great opportunity to review progress, answer any questions and solve any issues.

Here are a few pointers for running an effective meeting:

  • Create a formal agenda and allow individuals to add items in advance
  • Determine who attends the meeting and be consistent each time
  • Share recent successes and challenges in the business
  • Don’t use technical jargon or acronyms that others might not comprehend.

Embrace formality

While you might be relaxed around your loved ones at home, it’s important to keep things professional in the workplace.

Ensure each contract or agreement is formalised in a documented form, and never rely on verbal agreements for job descriptions, operating procedures, compensation, or other critical components of your small business.

When conflicts arise in the family business, you can keep them from escalating by putting everything in writing. You can refer to these written documents, from business agreements to project guidelines, to help reduce misunderstandings.

Don’t play favourites

When you’re working with family, you may be tempted to treat them differently than others, from praise and pay to work schedules and criticism. Playing favourites is a common management problem, with only 44% of family businesses having a clear policy in place for the policy for the selection, remuneration and promotion of non-family employees.

Whether you tend to set the bar higher or offer special perks to family members in your small family business, it’s critical that you eliminate favouritism in order to run a thriving company.

Create a succession plan

Only 27% of small business owners have a clear succession plan, according to a survey by KPMG. One factor in this lack of succession planning is the fact that many company leaders surveyed were under 55, and retirement seemed too far away.

In family businesses, succession planning is often complicated due to the emotions and relationships involved. In fact, according to KPMG, only 36% of future leaders expressed they were ready to take on the role, compared to 60% of current leaders saying they were confident in the future leaders. If you want to see your family-run business succeed for decades to come, you need to establish a sound succession plan.

When you consider the future of your family business, follow these tips for successful succession planning:

Start early
It’s best to plan when you’re about 10 years away from stepping down, but even five years in advance will work. The longer you can spend on planning, the smoother the transition process will be.

Bring family members into the conversation
You can avoid family discord by encouraging dialogue with your family. Instead of announcing your succession plan, invite them to share their personal goals and feelings.

Consider your family and what’s best for the business
When choosing a successor, don’t make any assumptions. While you may have envisioned your oldest child taking over your small family business one day, don’t assume he or she is your only candidate – or even interested in the responsibility. Decide which family members are viable candidates to lead the business and express your vision to all involved.

Lastly, take time to train your successor. You can make the transition smoother by working with your successor for one or two years before you officially step down.

Less stress, more success

It’s sometimes difficult to blend business and family. However, when you follow the guidance above, you can reduce the drama, foster an environment of communication and respect, and keep your family business strong for generations to come.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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