What to Know to Run a Successful Family Business A special excerpt from the upcoming eighth edition of Entrepreneur Press' 'Start Your Own Business: The Only Startup Book You'll Ever Need,' available for pre-order now.
The following is an excerpt from Entrepreneur Press' Start Your Own Business: The Only Startup Book You'll Ever Need, 8th Edition. Pre-order your copy today here!
According to the Conway Center for Family Business, 64% of U.S. gross national product comes from family businesses. In fact, 35% of Fortune 500 companies are family controlled. In short, family owned and/or run businesses comprise a significant percentage of all the companies in the United States and have for decades. You'll notice many family members running local shops and others with their names listed as founders of major corporations. A family business may mean the company was started and/or run by a husband and wife, brothers, sisters or the whole family.
Some have been passed down for generations. In fact, family run businesses have deep roots worldwide. The oldest family run business is a Japanese hotel called Houshi Ryokan, which has been run by the same family since the year 718. It's safe to assume that this small inn off the west coast of Japan has had several renovations over the past 1,300-plus years.
Family owned ventures have several advantages. For one, they can bring family members together on a shared project, or mission. Close-knit family members are also able to put in the extra effort it takes to start and run a business. This is typically because they have a strong commitment and personal loyalty to one another.
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During downtimes (which occur in any business), families are more likely to stick together and do what is necessary to keep the business going. There is also a sense of stability since a business can continue from generation to generation. And if young family members are interested, they can learn the business as they grow up, which means they are more likely to be engaged as they become more involved at a later age.
Families may also have a stronger built-in work culture, which is typically passed from one generation to the next. They tend to be more lenient and forgiving when it comes to work schedules, work-related decisions and judgments and even mistakes. Flexible schedules, child care and other perks you need to negotiate with employees can be much easier to work out. In addition, family members may be more willing than hired employees to make sacrifices to get the business off the ground, which can minimize expenses.
Among the most successful family owned businesses in the United States are Berkshire Hathaway, Ford Motor Co., Walmart, Cargill, Dell Technologies, Oracle, Mars, Tyson Foods, ViacomCBS, Virgin Group, The Gap, The Estee Lauder Companies, Las Vegas Sands Corp., Hearst Corp. and many, many small businesses all over the country. The flip side of family business harmony is that family members may take on roles for which they lack skills and experience. This can lead to stress and tension. Issues such as sibling rivalry and favoritism may also cause conflict among the family and trouble for the business. Moreover, some family members may not want to be a part of the business nor are they looking to inherit it one day. And in some cases, the needs of the business may interfere with the needs of the family, and this can prove disastrous. According to the folks at SCORE, family businesses employ 60% of the American work force. Not only that, but family owned ventures are also found in all parts of the country and in numerous industries.
So what are the secrets to a successful family business? StartupNation offers the following 12 keys:
1. Set some boundaries.
2. Establish clear and regular methods of communication.
3. Divide roles and responsibilities.
4. Treat it like a business.
5. Recognize the advantages of family ownership.
6. Treat family members fairly.
7. Put business relationships in writing.
8. Don't provide "sympathy" jobs for family members.
9. Draw clear management lines.
10. Seek outside advice.
11. Develop a succession plan.
12. Require outside experience first (i.e. family members take classes to learn about their role in the business; for example, whomever you choose as bookkeeper should take a book- keeping course).
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Family members in business together can bond and have great experiences. It's all about communicating, sharing the same goal and not letting the business interfere with your personal relationships. That means knowing when not to talk about the business and understanding everyone's role within the company and their commitment: Some family members may have more time to commit while others, perhaps in college, may not have the same time to offer. It's not always easy, but it can work out very well for everyone involved. And remember, not every family member may want to be in the family business — and that's OK, too.