This guide follows on from our suite of materials on starting a family business. If you’ve read and followed the advice and actions recommended in our guide to starting a family business, you’ll be ready to consider the steps and actions discussed in this guide.
Once again, we’ve collaborated with Family Business Solutions, our expert partners, to help us cover everything you need to successfully lead and grow a family business, all while handling changes, conflicts and all your legal and financial obligations.
What's in this guide?
- How to maintain family and business focus
- How to build on your strengths as a family business
- How to maintain your objectives and handle any ownership and/or management changes
- How to meet your legal and financial obligations
- How to handle conflicts and/or disagreements as a family business
- How to deal with pressure within a family business
- How to handle disaster situations, such as shut-downs or insolvency in a family business
Maintaining family and business focus
Continuously assessing the strengths and challenges of your family business ensures that everything - and everyone - stays on track and happy.
Family happiness and business success are interdependent. They impact each other substantially when it comes to meeting your collective aspirations and achieving the best business performance.
So, if you're regularly assessing how the dynamics work together, you'll be well prepared for business, family and life events that will inevitably crop up from time to time and you'll be in good shape to handle them.
When should you be taking stock of this dynamic - and what's involved?
You should be assessing the strengths and challenges of the family business dynamic regularly.
To do this effectively, you should:
1. Put in place an effective system to help you to easily, openly and constructively assess the business-to-family dynamic in your business
2. Address any particular areas of concern or identified opportunities that come out of these regular, open and inclusive discussions
3. Maintain a way of operating the business so that any unavoidable impacts on your family (in terms of relationships, pressure of expectations, commitments and workload, etc.) are easily identified and can be well managed
4. Satisfy yourselves and any other relevant stakeholders (e.g. customers, supply partners, banks and financiers) that the direction, management and performance of your family business is sound
5. Schedule regular reviews by all those who matter (including family business workers and owners) of your business and management plans. Take stock of the condition of the company, the attitudes and mindsets of your staff (including working family business members) and the challenges/contingencies that you identify as needing to be planned for
6. Practice good governance and management rigour. This means, for example: a) Management and/or board (if a limited company) meetings should be held regularly and minutes taken and securely recorded b) Business and management plans should be in place and regularly reviewed c) HR plans are clear and actioned according to the plan and the business’ policies – including the family business employment policy d) Together with the wider family, you review the family constitution at least once a year
Building on your strengths as a family
Successful family businesses demonstrate superior potential and performance over and above non-family run businesses.
This is often attributed to greater motivation and commitment on the part of those running them. Those family businesses who achieve this success are typically clear on family (as well as business) goals, roles and legacy expectations.
They harness family and non-family expertise and talents and blend them fairly and transparently, creating great cultures and working practices. Thus, making their businesses a destination for skilled and driven non-family members as well.
If you embrace this opportunity fully, you'll have the ability to build – profitably and sustainably – on these strengths.
Areas that frequently benefit from the strengths that a well-run family business can bring include:
- your product and service development
- customer service
- workforce relationships
When and how should you be doing this?
You should be building on your specific strengths right from the business planning stage, but also continuously as you develop and grow.
Find out how to achieve this effectively by watching the next video explanation below.
Maintaining objectives and handling ownership and management changes (not succession)
By this point, you’ll want to make sure you've got a firm grip on your objectives and maintain them so you are ready to deal with any ownership changes or management changes that may come into play.
Looking at and maintaining your objectives will also have been done when you set up the business (and you worked on your motivations and family constitution, business plan, management plan and your HR plan).
You need to keep all of these under review throughout the lifetime of your small business to make sure that those objectives remain on track.
3 key things to achieving good governance in family business
1. The board
The group of managers who run the business. They need to be functioning well and looking after the business.
2. The shareholders
Your shareholders should meet no more than once or twice a year to keep an eye on the business and where it’s going.
3. The family council
Also known as the family assembly, this is a means by which the rest of the family can also hear about what’s going on in the business.
Anyone in the wider family who wants to be included in the family council can be. This way, they get to hear about the business in the right way, from the people who are directly involved in it.
Good governance is great for business. They make great tools of reference and control and help look after the ownership and family side of the business.
However in terms of the day-to-day running of the business and maintaining and sustaining business objectives, that’s where business analysis and management reporting comes in; what’s happening, why it’s happening and what’s being done about it?
What sort of changes to ownership or management should you expect?
As the business grows and changes, family members with different skill sets may have to get used to new roles and priorities and perhaps a different level of responsibility.
2. Attracting talent from outside the family
With change and growth, the family may need to bring new people on board, sometimes in senior positions. Attracting the right talent may be difficult if they feel that promotion opportunities may be harder to come by.
Family members may wish to explore or experiment with new ideas to mirror changes in the market, combat diminishing sales or as part of their vision for where the company could be in the future.
Supporting family members to pursue such moves keeps them on board, motivated and diversifies the business. It may even potentially future proof the business for years to come.
FBS offer some great tips on how to ensure that you maintain focus on your objectives, even during non-family management changes and/or ownership changes, in the video below.
Want to access this guide?
Already have a Farillio account? SIGN IN
Get unlimited access to 100s of legal resources by signing up to Farillio today.
- Manage your legal documents online
- Well written legal templates by our partners
- Guides to help you understand law
- Legal help available every step of the way