Successful Family Business

Successful Family Business
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.
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).
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.
8 Characteristics of Successful Family-Owned Businesses
1. They Face Difficult Decisions Head On
Successful business owners aren’t afraid to stare down difficult decisions in the face. But in a family-owned business, where you have family relationships in the mix, things can get messy fast.
Just because your son shares your last name, for example, it doesn’t mean he’s the right person to take over the business when you retire. Likewise, promoting a qualified long-time employee to president, instead of your daughter who doesn’t have enough experience yet for a leadership role, can ruffle feathers.
Decisions are particularly difficult when you mix family and business, but it’s absolutely essential to make those difficult decisions with the overall welfare of the family business in mind.
2. They Have an Exit Plan
The numbers don’t lie. Unfortunately, studies show that only about 70% of family-owned businesses make it to the next generation. According to the Family Business Institute, only 12% of family businesses are still around in the third generation, and only 3% are still operating in the fourth generation.
If those statistics show us anything, it’s that transferring a family-owned business from one generation to the next is no sure thing. It’s tricky, and that’s why you need a detailed exit plan that lays out a clear roadmap for you, your business and the next generation of leaders.
Having an exit plan in place — and sticking to it — can help remove some of the emotional stress of making difficult decisions like the ones described above.
If you’re already in business, you hopefully already have an exit plan. If you’re starting of thinking a family business, now is the perfect time to start thinking about your exit. That’s right, the ideal time to plan your exit from the business is before you even start the business.
Regardless of where you are in the exit planning process, we have a resource that’ll help.
3. They Are Honest With Family Members
This one speaks for itself and falls in line with “they face difficult decisions head on,” described above.
Say you have three children and all of them want to be involved in the family business. You, as the business owner, have to be honest with yourself and your children. Not everyone can be the president. Be honest with your children about their skills and abilities. Make your intentions known sooner rather than later (refer to your exit plan!) and be honest about what is best for the family business.
4. They Aren’t Afraid to Rely On Outside Advisors
The family-owned businesses with the most impressive longevity often keep things close to the vest. But that doesn’t mean they avoid seeking help from outside advisors. In fact, owners of successful family businesses realize how critical it is to get the objective input of non-family members who aren’t involved in daily operations.
Those owners know that when family and business mix, emotions often get in the way. When things get heated and messy, outside advisors can help bring down the temperature in the business.
At a minimum, your team of advisors should include a CPA, attorney and banker.
5. They Hold Non-Family Members and Family Members to the Same Accountability Standards
Some of the strongest family-owned businesses tap into the expertise of non-family members to help run the business. Some of those employees are just as dedicated to the business, and knowledgeable about it, as family members.
But tread carefully. One of the quickest ways to undermine a good employee’s positive attitude and dedication is for the business owner to show favoritism to a family member.
When that outstanding employee sees Jack, the owner’s son, consistently roll into the office parking lot at noon in his shiny new Tesla, don’t expect it to go unnoticed by employees. The most admired family-owned businesses have a reputation for treating employees and family members fairly and equitably.
6. They Embrace Change
Don’t be comfortable with “this is what we have always done,” or you’ll be the last family business making wagon wheels.
While your business might have made it to the next generation, is it poised to make it to the next? Ask yourself if you’re offering products and services that are still relevant. Do you have a plan for how to differentiate your business from the competition in a crowded market? You get the idea.
Change is inevitable and must be embraced by any business that wants to remain successful in the future. Make sure your stakeholders are on board with the need to evolve.
7. They Don’t Ignore Financial Reporting and Oversight
Many family business owners see financial reporting as a necessary evil, but accurate and timely reporting can quickly show where the company is doing well and where it is not.
Embrace and prioritize financial reporting to help your management team make decisions in real time. Make an effort to delegate financial functions to various individuals, particularly when cash is involved. Include a qualified and trusted family member whenever possible. Accurate and concise financial reporting on a timely basis, along with tight internal controls, can help ensure your family’s business success in the future.
8. They Keep Family Emotions and Dynamics In Check
A struggling family business is bad enough, but a struggling family is even worse.
Although the business might close at 5:00 PM, work and home too often overlap in family-owned businesses. Make an effort to separate work time and family time for the good of the business and the good of your family.

REFERENCES

1. 
   https://www.gma-cpa.com
   
2. 
   https://www.entrepreneur.com