Family Businesses
Dear Readers,
A brother and brother-in-law own a small auto-body shop in Kansas City, Kansas. They initially saw the benefits of working with family but since starting their business eight years ago have had challenges separating their personal from professional lives, which is causing their business to deteriorate. They wrote, “We are family and we want to support each other. We don’t always see eye to eye on business matters and have recently had problems running the business because of our personal differences, which seem to be hurting our business. What should we do?”
Josh: Most small businesses in the United States are family-owned. In fact, according to the Conway Center for Family Business, about 90 percent of all American businesses are family-owned. The good news is family businesses account for 60 percent of U.S. employment and create 78 percent of new jobs. The bad news? Only about 30 percent of family-owned businesses survive into the second generation.
Pedro: There are benefits for working with family members. Family-owned businesses, like yours, can bring families closer, allowing them to spend time working side by side all day, every day. Also, hiring your family members is one of the most powerful (and underused) tax strategies for small-business owners. Unfortunately, family-owned business also present many issues.
Josh: It’s definitely important to keep business and personal life separate. Make sure business disagreements stay at work and home issues stay at home. It’s easy for small business owners to be consumed by their businesses, making it natural to talk business 24/7. Rather, you must separate your personal from your professional life, so you can focus on the best interests of the business. A simple tip is to create separate bank accounts for the business and hire an independent CPA to do the bookkeeping. Create a calendar with set meetings to discuss the businesses and invite the CPA or bookkeeper to attend.
Pedro: Conflicts are bound to happen, whether you are a family owned business or not. With your family-owned business, ask yourself: is the communication style at your family-owned business based on family (not business) dynamics? Too often, issues are ignored or exaggerated, depending on what family member has them, leading to resentment—and eventual confrontation. The key is to address family business conflicts openly and immediately, and not in front of non-family employees.
Josh: That’s right. Emotions run high at family businesses, and it’s essential to keep them in check. Business arguments should be confined to business issues. In other words, the conflict should be treated as an issue among coworkers and not among brothers. An outside advisor, such as a family business consultant, your board of advisors or even a family therapist, can be helpful in mediating family business issues impartially. (It’s important, though, to make sure all family business members agree on who the outside advisor/s should be—ideally before any problems arise.)
Pedro: I know it’s easier said than done, but it’s critical that family members learn to keep their personal feelings out of decisions and put the business first during working hours to enjoy long-term success.
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