Friday, August 12

Tips to Avoid Family Business Failure

Family Business

Family businesses can be heaven on earth, bringing the family together into a cohesive unit while securing financial safety for everyone involved. They can also be hell on earth that can break a family apart and lead to financial ruin. It’s a tricky minefield that doesn’t always have a clear answer. That is why we are going to talk about some of the ways that you can avoid destroying your family [business].

Educate Your Youth

When you are planning on your kids succeeding, you better make sure that they are prepared for the treacherous world of capitalism that awaits them. A big factor in why some family businesses fail is because their youth isn’t educated or prepared enough to take over the family business. There are several ways to make sure you reduce the chances of them turning out incompetent:

  • Expose Them to the Family Business From an Early Age

Doing this will give them an early sense of how things work around the business, and they can start slowly readjusting to what needs to be done for the business to succeed. It will also give them a more formed opinion on whether they truly want to take over the business or not.

  • Invest in Their Education

If you want a worthy heir, you will need to educate them. With advanced knowledge in finances plus the field the business covers, you ensure that your successor will at least be competent enough to carry out the business and not run it into the ground.

  • Raise Them With a Solid Sense of Responsibility

One of the most important factors when joining a business is learning responsibility. That is much more important in a family business where people tend to use nepotism to their advantage and play the pity card how it isn’t their fault. You can have an honest hard-working child only if they have the feeling of responsibility engraved into them.

Don’t Force Your Kids Into the Family Business

We are way past the times where you could force your child into your business without their say, and for a good reason. If you force your kid into the business, you can very well expect them not to do a good job (or even a mediocre one). If they feel unfulfilled and irritated that they are forced to participate in the family job, they will inevitably hate both you and the business. You avoid this by explaining the situation to them over years, seeing whether they show interest in what you are doing and if they want to take over someday. Finally, when they are ready, they can apply for your business just like any other, but what’s important is that you will maintain all of the criteria like you would with any normal employee, family or not.

Be Clear on the Goals of the Family Business

Going into the whole ordeal, you need to make it clear to everyone involved what the exact point of the business is. Is the business going to be a collective passion project? Is it going to be a long-term commitment that you want your kids to educate themselves for? Is it going to be only a short-term thing to gain some money? Are you doing this only to ensure that your family members will have jobs? These are all vital questions that require serious consideration. Maybe you are even doing this to keep the family together because you aren’t satisfied with just phone calls every month. Whatever your reasons may be, don’t drag the members against their will or deceive them with the actual goals of the business, as you will require their full awareness of the point of the business, and only then can they commit or leave.

Don’t Insist on Equality, Insist on Meritocracy

There is no such thing as perfectly equal performance. People will work differently and have different levels of motivation to do so. They will contribute to the business in their ways, but some will put a lot more effort into it. That is something that you need to make clear at the beginning to avoid problems down the line. You want to avoid the situation where your daughter is asking you to be paid the same amount as the mother while doing half the work. Reward people only based on how much they contribute to the business. You need to treat the family members and the non-family members equally. Use already-established business standards and norms for this, and there won’t be any problems. So you can throw factors like family positions, age, and personal needs out the window.

Inheritance Fights

Once the time has come to decide on who inherits what is when the family will fight the most. Everyone will overvalue themselves and say that they deserve a bigger share of the business. Sometimes some will want to throw it all away and refuse to inherit anything. It isn’t uncommon to see in some situations even a family lawyer is required to solve all of the disputes. The older members in charge will struggle with accepting the fact that their time is over and passing down the lead role to their kin. There is no real solution to this issue as every family is different. It will fall on you to think of a way to deal with this without breaking the whole family apart.

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