For some, the words “family” and “business” sound good together. For others, they mean inevitable conflict. To a financial advisor in Brentwood, TN, a family business can go in either direction, but there are a few steps that can help both your business and your family thrive.
Despite the financial benefits and generational wealth that can be gained by running a family business, an improperly run family business can contribute to both personal and financial ruin.
At TrustCore, we work with many family-run business owners, serving as a sounding board to define roles within their companies and helping navigate other financial planning issues that are unique to the structure of their companies, such as seamlessly transferring a company to the next generation, protecting current and future generations in the event of unexpected loss and making the tough decisions about employee benefits and retirement plans. In our experience, we see 5 things that can help mitigate family conflict in these inter-generational business relationships, keeping the business profitable and family relationships strong.
We also understand that every business is different. If you’d like to discuss your specific situation in more detail, contact us! The TrustCore team is ready to help.
Business ownership, like any other business endeavor, has its own natural risks and obstacles. Family, like any other relationship, has its own difficulties as well. Still, it’s important that family and business issues don’t mix. If the lines between the two become blurred, it can damage your relationships and make your business suffer.
One way to make this separation easier is to simply honor your business hours. Make sure to address business problems as strictly business problems only, keeping feedback and discussions non-personal, and handle them at work; don’t bring them home with you.
While it may seem odd to separate business from personal when interacting with loved ones, it helps avoid stepping on a family member’s toes unnecessarily, and makes any potential problems on the business side easier to resolve.
Depending on the size of your business, there’s a really good chance that you or another family member will wear many hats and fulfill different roles. This can be helpful and an effective cost-saver, as you can rely on someone trustworthy. But, without clear roles, you risk overworking your family members, and inadvertently pushing them away. The folks you rely on the most in your family-run business can feel unappreciated.
If you empower family members with clearly defined roles and job functions, you can help them do their best work and know when their duties end for the day. Even if you have an easygoing family culture, in our experience at TrustCore, clarity beats the guessing game in the long-run.
Naturally, organizations are a mix of people, each with a unique communication style, preference and overall temperament. One employee (a family member) may prefer a direct, straightforward method of communication, while another employee leans toward a more subdued approach. To level-set the communication structure of your business, it’s extremely important to establish a repeatable process for conflict management.
With a predetermined process, you can clearly define the rules of engagement, obtaining employee buy-in and clarity instead of leaving conflict resolution up in the air. Without a process, the lines between business and personal matters can become dangerously blurred.
For example, if you are forced to intervene in a conflict between two family members, how can you defuse the situation without appearing to play favorites? If you have an established process in place, you have a first step. This can ensure that disagreements are resolved by rules and less influenced by personality type.
The hope for many family business owners is to employ loved ones who are suitable and competent, with the expectation that the business will remain in the ownership of their family for the long-run. But this is not always the case.
Family members can quit, pursue other opportunities or simply retire. If you aren’t sure that your involvement in the family business will be long-term, make sure that the family members you work with are aware of your plan. If you leave sooner than expected, you can damage the business in the short-term by forcing your family to scramble and adjust to your abrupt absence.
Though it seems simple, communicating a potential departure as early as possible can help those in charge of personnel management plan ahead, avoiding unpleasant surprises.
Another important part of your exit plan that your family members should be aware of is what occurs in the event of a family member’s retiring, quitting or passing away. If your family understands the succession strategy for your business, it can reduce the risk of communication breakdowns. According to reports, 70 percent of business owners say they’d like for their business to be passed down to the next generation, but only 30 percent are successful in doing so. This shows the importance of having a plan in advance.
Similar to the process needed for conflict resolution, having open communication removes guessing and impulse from the equation. Making an effective exit plan may seem difficult, but you don’t have to go it alone. Read our recent blog post: It is Business and it is Personal – Why Financial Planning for Business Owners is Necessary.
A financial advisor can be a great asset to you and your family-run business. With a laundry list of items to remember and manage on a regular basis, a financial advisor can make your life easier by helping administer both your business plan and personal financial plan.
In addition to your retirement plan and overall portfolio of investments, at TrustCore, our financial advisors serve as your resource for important matters like creating a family trust, emergency planning, establishing succession and inheritance plans, and ensuring that all of these processes are easily managed or even automated.
Furthermore, a financial advisor can be the key difference maker in important financial discussions with loved ones. Financial advisors who specialize in helping family-run business owners can serve as a mediator for your family, acting as a non-partial third party in complicated financial decisions.
Blood is thicker than water. On one hand, the bonds and shared values of a family-run business can be an incredible advantage in the business world. On the other hand, poor business management can stain relationships and create family rifts that are difficult to heal.
By following a few simple, but powerful guidelines, your family business has a better chance of success, growing into the dynasty you may dream of.
Getting started can be difficult. Schedule a no-obligation conversation with TrustCore’s team of financial advisors in Brentwood, TN to see how we can help.
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