For Subscribers

Managing Your Critical Operations

Make the most of your family business by managing these five resources.

By David Newton

Opinions expressed by Entrepreneur contributors are their own.

If you own a family business, you probably worry even more than the average entrepreneur about ensuring that your company not only survives, but also thrives to nurture the next generation. In "Managing Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms" (Entrepreneurship Theory and Practice, Summer 2003), David Sirmon and Michael Hitt examined the strategies behind successful family businesses. They found that success is tied directly to how well a company manages the five unique resources every family business possesses.

  1. Human capital: The first resource is the family's human capital, or "inner circle." When the skill sets of different family members are coordinated as a complementary cache of knowledge, with a clear division of labor, the likelihood of success improves significantly.
  2. Social capital: The family members bring valuable social capital to the business in the form of networking and other external relationships that complement the insiders' skill sets.
  3. Patient financial capital: The family firm typically has patient financial capital in the form of both equity and debt financing from family members. The family relationship between the investors and the managers reduces the threat of liquidation.
  4. Survivability capital: The family company must manage its survivability capital-family members' willingness to provide free labor or emergency loans so the venture doesn't fail.
  5. Lower costs of governance: The family business must manage its ability to hold down the costs of governance. In nonfamily firms, these include costs for things such as special accounting systems, security systems, policy manuals, legal documents and other mechanisms to reduce theft and monitor employees' work habits. The family firm can minimize or eliminate these costs because employees and managers are related and trust each other.

Clearly delineating these unique family resources and leveraging them into a well-coordinated management strategy greatly improves your business's chances of success compared to nonfamily-owned companies.

Continue reading this article — and all of our other premium content with Entrepreneur+

For just $5, you can get unlimited access to all Entrepreneur’s premium content. You’ll find:

  • Digestible insight on how to be a better entrepreneur and leader
  • Lessons for starting and growing a business from our expert network of CEOs and founders
  • Meaningful content to help you make sharper decisions
  • Business and life hacks to help you stay ahead of the curve

Editor's Pick

Have More Responsibilities at Work, But No Pay Bump? Use This Script to Get the Raise You Deserve.
Black and Asian Founders Face Opposition at All Levels — Here's Why That Has to Change
Business News

'This Made Me Physically Recoil From My Phone': Lingerie Brand Apologizes For 'Creepy' Ad Referencing Ryan Reynolds and Bras

Online lingerie retailer Harper Wilde is under fire for a bizarre sponsored post it has since pulled from Instagram.

Thought Leaders

5 Small Daily Habits Self-Made Millionaires Use to Grow Their Wealth

We've all seen what self-made millionaires look like on TV, but it's a lot more subtle than that. Brian Tracy researched what small daily habits these successful entrepreneurs adopted on their journey from rags to riches.

Leadership

Blake Lively Knows Being a Perfectionist Is 'Weaponized' Against Women, But She's Micromanaged Her Way to Millions, So She's Not Stopping Now

The "Gossip Girl" actress is done apologizing for being a control freak. After all, obsessing over every little detail is what's made her mixer brand Betty Buzz a raging success.

Business News

Viral Sensation 'Popcorn Guy' Has Earned a Gig at the 2023 Oscars

Jason Grosboll first went viral on TikTok for his theatrical method of buttering popcorn in a Texas movie theater.