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Your Family Business
Family-owned businesses come in different shapes and sizes, from Walmart to small home-based organizations. Even though these entities can be vastly different, family-owned businesses face many of the same challenges. What can be done to manage the challenges while allowing inherent strengths to shine and opportunities to be seized?
There are many strengths and opportunities for family-owned businesses. They can be flexible, pioneering and responsive. Most value long-term success instead of short-term gains. The goal is to manage the challenges allowing the strengths and opportunities to be acted upon, which will have the family business succeeding for generations.
Family businesses intertwine two dynamics. Clear communication is essential to grow individuals and the business. Document decisions with complete notes; document the decision and rationale. Distribute notes in a timely manner to stakeholders and incorporate feedback. People remember decisions differently. Notes help clarify memories.
Meet regularly to review timely and accurate financial statements. Properly prepared and presented, these communicate the business’s financial condition. Having the business’s CPA present the financials and answer stakeholders’ questions facilitates discussions, reduces bias and diffuses family dynamics in the business setting. Surrounding the family business leaders with unrelated experts (on the board of directors or another consultative role) brings outside perspectives. These experts might be financial, marketing, academic or business leaders.
2. CHANGE MANAGEMENT
Family businesses tend to do things the way they have always been done. This approach makes change difficult and many times only materializes involuntarily by outside forces. If the change is too late, the business struggles or fails. By involving unrelated trusted advisors, change can be introduced and accomplished more quickly.
3. SEPARATE BUSINESS & FAMILY
Keep work at work and family issues as far away from the business as possible. Family dynamics tend to transfer to business dynamics. This may be reduced if the business discussions are held at work during business hours or at special arranged meetings and not, for example, over Thanksgiving dinner.
CPAs and other business consultants can be neutral and stabilize emotions. They bring expertise from working with numerous family businesses across many industries. Fresh perspectives help accomplish goals. Avoid placing family members in positions for which they are unqualified. If a decision is made to place an individual in such a position, create a specific, detailed action plan to provide the education or experience necessary to excel in the position.
4. STRATEGIC & ESTATE PLANNING
Confront planning issues sooner rather than later. Many families believe their challenges are unique to their family business, when in reality, most of the challenges are very common. Planning is more important in a family business because most of the assets are usually invested in the business. This makes their separation and shifting more challenging, which takes more time to plan and more years to execute with tax efficiency. Starting sooner can produce better outcomes for the family dynamics and bottom line.
Heath joined McDermott & Miller in 2014, with over 15 years experience in business management and consulting. He is involved in his community and currently serves on the Board of Directors for the Grand Island Chamber of Commerce.
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