24 Jun All in the Family Business
Traditionally, Mom and Pop or family businesses have been the backbone of our economy for ages here in the states. And they continue to be a powerful force. In fact, family businesses account for 60% of the U.S. employment, create 78% of new jobs and account for a whopping 50% of the gross domestic product.
But family businesses are not just Mom and Pop stores. They can be major corporations, 35% of Fortune 500 companies are family run. For example, Marriott International’s chairman and CEO is the son of the founder. It’s a publicly held family business.
That just goes to show you that having or starting a family business can be a terrific idea.
In addition, family members that have worked in the family-owned business are reportedly much more likely to be successful in their own business or in taking over the family business, down the road.
Generational Family Business
Most family business founders are owner-managers with the intentions of passing the business on to second generations. However, only a third ever make that transition, with one notable exception. In the past 5 or so years, woman-owned business has increased by 37% and evidence indicates they are better prepared to transition to their daughters than their male counterparts.
The keys to the family business surviving for generations:
- Adaptability to the marketplace
- Keeping true to values, building and retaining value with customers
- Belief in stewardship over ownership
- Proper positioning of the “Family Brand”
Small businesses often have some difficulty finding good employees, which can be resolved by hiring family members (or friends). This can make for the best employees you could ever have. But don’t hire them simply because they need a job, or you are desperate for employees, because it doesn’t always work out.
You need to separate emotion from business fact.
Whether it’s “all in the family” or not, negotiations need to take place in the very beginning – before anyone falls out of love with the idea of being a part of the business. For small businesses, once they get past the “kitchen table” stage, evolution of the entity structure needs to take place – as soon as possible.
The first thing to consider when hiring family members should be based on their merits and not familial ties. There are times when hiring professionals from outside the family is necessary and important for the strength and survival of the business. This can be difficult for some involved.
Advantages and Disadvantages of Hiring Family
On the other hand, there are quite a few advantages of the family business. Unity of opinion on the business direction and strategy can be one, and a willingness to work together for the long-term is another. Caring usually runs deep, as well.
- A family member that’s already familiar with your business would require less training.
- Hiring children could mean tax advantages and insurance savings.
- Family usually will possess a strong commitment to the success of the business.
- If it’s someone from your household, it’s harder to “get away” from business after hours.
- Family disagreements can be brought to the workplace.
- Accusations of favoritism and jealousy from non-family employees can occur.
Get it in Writing
Unless your business is a partnership or corporation, never give anyone else permission to lead the business, or release responsibility or accountability on any decision. Make your relationship very clear right from the start.
If your intent is to have a family business with more than one owner, form a legal partnership, or preferably, a corporation immediately.
I can’t stress those points enough.
How about you?
Do you have a family business or hired a family member? How’s that working for you?
Are you considering a family-involved business? In what regards?