7 Tips for family Businesses



TAB Facilitator/Coach, Doug Roof, shares business tips and best practices for managing the complicated relationships involved in a family business. Doug recently facilitated a meeting of five business owners, all of whom lead a business with other family members involved. They were gathered to share best (and worst) practices based on their own experiences. The discussion focused on bringing the next generation into the business, and preparing them to take the helm. Here are the most significant family business tips that emerged:

Family Business Tip #1: The next-generation family member should start out “mopping the floors”. They need to earn the respect of other employees.

Family Business Tip #2: Establish the discipline from day one of differentiating between “talking business” as employer-employee, and “talking personal” as family members.

Family Business Tip #3: A young family member in their teens entering the business, even on a part time basis, creates special challenges. Their lack of real-world work experience makes it harder for them to understand the necessary separation between family and business relationships.

Family Business Tip #4: Family member employees need exposure, over time, to all areas of the business. Ascertain whether the organisation can compensate for their weaknesses and allow them to play to their strengths if and when they assume the leadership position.

Family Business Tip #5: Be willing to accept the fact that the next generation family member may not be cut out to eventually run the business.

Family Business Tip #6: You must manage your expectations, which may be distorted because you are personally close to the family member. Allow them to surprise or disappoint you, and make necessary adjustments to your expectations and plans as they do.

Family Business Tip #7: Differentiate between compensation and business ownership. Compensate based on contribution to business results. Allocate ownership based on any family considerations you deem to be fair.

Running a business is challenging; leading a family business adds another layer of complexity which only family business owners can fully appreciate. What business tips and best practices have you found helpful in managing the complicated dynamics involved in a family business?


Developing Owner Mentality

As my son develops in his role as my successor in the company, I notice that his thought process is becoming more layered. He sees problems, but instead of just fixing them, he’s asking more questions, such as “Why is this happening?” “What is the longer term impact of my solution?” and “What system has to be fixed so that this can’t happen again?” It’s this type of thinking that will make him a great business owner.


Is Joining the Family Business Right for You?

My experience with a number of family businesses has led me to believe that it takes a very special parent-child relationship to achieve success. If you’re thinking of joining your parent’s business, there are some important questions to ask yourself before making a decision.

1. Do you have the right skill set/education?

It is important to add value to the business, not just for obvious reasons, but also to feel like you truly have earned and deserve your spot. If your skill set does not align with the business, the experience may be challenging – either because you’re not engaged (due to a lack of interest) or because you can’t grasp the work.

2. What relationship do you have with your parents?

Critically analyse the relationship you have with your parents. Will the level of respect that is necessary in a professional setting be met? If your relationship is tumultuous outside of work, chances are that will translate in to the workplace.

3. What type of work environment are you looking for?

If you’re looking for camaraderie among your coworkers and equal treatment, working in the family business may not be for you. As the child of the owner, the company employees automatically see you differently, and work can even become a lonely place.

4. What are your long-term goals?

Do you plan on staying with your family business forever? If so, do your parents plan on having you there forever? Your goals must be aligned with those of your family. If you plan on taking over the business, how long are you willing to wait? Your parent may not be ready to relinquish the business to you as soon as you think.

5. Will you have the autonomy you want?

Are you trusted enough to make decisions and have your voice heard in a family business? It is often easier for parents to undermine the opinions and ideas of a child rather than someone they have a professional relationship with. If you’re looking to have creative ownership and freedom, you must decide whether it exists for you in your family business. Ultimately, it can be difficult to successfully integrate yourself into the family business. Whether you’re starting from the bottom and working your way up through the organisation, or moving right into the corner office, you must understand the risks that come with mixing your professional and family lives.


Is there a point to a family business charter


Managing and maintaining complex relationships, emotions about handing over, style clashes and broken silent agreements

-        the reality of the family business  -


First do no harm

The belief system of many inheritors is to protect the legacy of the business they are taking over. Of course they wish to do things differently, to put their stamp on the business, and assert their control. However it was not far from their parent’s cot that they caught and learnt their values. However they are also different to their parents, in their behavior, their drivers, their experiences and the decisions they reach. However the belief system of first do no harm can be the rock that the business perishes upon because the business was built on the creative entrepreneurial quality of its founder. I am reminded of the parental wisdom phrase often quoted: ”Son don’t move the fence until you know why it is there”. Under competitive pressure many second generation business owners seek inspiration in the past success but success often lies elsewhere.


Making the transition  



Families in the process of transferring their business to the next generation have a number of complex challenges to overcome. Maintaining the viability of the business enterprise is foremost in their minds to support both the exiting generation and the new generation coming through. The family look to the usual sound practices of good business planning, sound management, effective processes, and the ability to market and compete within a competitive marketplace. The bottom-line focus is to generate revenue streams and investments to sustain the family now and in the future.


The problems that arise   



However matters are rarely smooth. It can be difficult to maintaining healthy relationships among family members who are directly and indirectly involved in the business. It is hard for those involved to see the wood from the trees. The actual hand-over between the generations can be seriously undermined by disruptive family issues like a history of parent-child conflict or sibling rivalry among natural or blended family offspring. Marital discord, unresolved divorce issues, alcohol or drug addiction and abuse further complicate the process.

Underlying these issues is a basic lack of trust among those involved.


Creating a sustainable framework – The Family Charter


Planning is essential and the early involvement of a neutral experience third party can help work though the creation of a framework. This involves the development of guidelines for family member employees to include education and experience requirements, competitive salaries and promotional opportunities, and gaining the respect of non-family employee peers through above average work performance. It also involves the critical but delicate process of engaging, preparing, and selecting interested, capable family members as future leader(s). A family charter which formally sets out these guidelines or rules of engagement have proved to be very successful in a number of well-known companies, the Musgrave Group being the best know.




Common challenges



1. Letting go: The first generation leader, often a strong, hands-on entrepreneur, is required to make the gradual, difficult shift to a more mentoring, advisory role. After years at the centre of the business, letting go is more complex than it seems. It’s an emotional, life changing process which requires developing a different, less central role in the company, and the development of new endeavours and roles in business, the community and the family.


2. Stepping up: The second generation leader(s), often self-assured and confident, can struggle to “gradually” assume responsibility for the family enterprise. In their frustration to move up and out from under their parent/leader they can develop a defensive arrogance, cutting them off from the deeper learning needed for success over the long haul. Maintaining a balance between their wish to move forward and their need to remain respectful and open to mentoring can be difficult.


3. Going slow to go fast: Successful family business succession takes time. It requires good business and succession planning and lots of room for hands-on-practice and on the job training. Above all, it requires regular and effective communication between the principles, family members and key employees. It’s at least a three year process.


Family business succession is a journey with long-term financial and relationship ramifications. It offers a wonderful opportunity to take the business and the family to a higher level of functioning. Investing your time and resources in this significant venture will set the stage for good stewardship of the family business for generations to come.  It is possibly the biggest transaction you will ever under take. You have a responsibility to plan it and do it in a way which gives it the best chance of sustainability. The lawyers and accountants are there to execute the documents and plan the taxes but you may need independent help with the heavy lifting of creating a good plan in the first place.


Next Steps?



If you want help putting together your succession plan or there are some other family business issues bothering you, please email [email protected] or contact your local TAB facilitator.