You’ve heard of Walmart, Ford, Comcast and Marriot. But did you know they’re all family-owned businesses? Family-owned businesses make up some of the largest and most successful companies out there. If you’re thinking about starting a family business or if you already own one, watch out for these five mistakes that can hinder your company’s growth.
Combining Your Finances
Family businesses are often small and run out of the family home. As a result, you might forget to separate your personal finances from your business finances. When home and business accounts merge, family business owners run the risk of making big financial decisions that can bankrupt both the family and the business. Avoid this pitfall by maintaining separate accounts. Family business owners might also want to incorporate or form an LLC, which prevents the family from being liable for the debts of the business and vice versa.
Not Setting Clear Roles and Responsibilities
Setting boundaries and clearly communicating with your employees — whether they’re family or not — is vital. Everyone needs to have specific responsibilities in order for the company to succeed. When employees are wearing many hats, it’s easy for tasks to fall through the cracks. By defining roles, you’ll ensure that everyone in your family-owned business knows their responsibilities.
Assuming All Family Members Want to Participate
You’re excited about your new business venture! But that doesn’t mean all of your relatives feel the same. It’s a mistake to assume that everyone in the family shares your passion for the business or wants to work at your new company. Don’t create roles for family members before they’ve agreed to work with you. You want all your employees, family or otherwise, to share the same excitement for your business that you do.
Losing Non-Family Employees
In many family-owned businesses, family members tend to occupy all leadership positions. Without an opportunity for non-family employees to advance or take on leadership roles, you put your business at risk of losing talented and ambitious employees. As a business owner, it’s important to realize that every business needs a mix of family and non-family employees to help the company grow.
Not Having a Succession Plan
There is going to come a time when you or someone in your business wants to retire or leave. A succession plan will help ensure your business continues to thrive for generations to come. Without a plan in place, your remaining family members might argue over who should run the business in your absence, which is why it’s crucial to include provisions for retirement or sickness in writing. By making the necessary preparations, your family will know exactly where they stand, and your business can continue to grow.
Remember These Tips
Keep your family business running strong with this advice:
- Clearly define the goals of your business, and make sure your family and all employees are on the same page.
- Outline employees’ roles and responsibilities, and hold them accountable.
- Keep an open line of communication and address all concerns quickly.
- Create a fair promotion and salary system so all employees, family or not, stay motivated and have a path for growth within your company.
- Create a succession plan to ensure your business continues to grow long after you’re gone.
We’re Here to Help
You face many challenges as a business owner. Farm Bureau Financial Services understands how hard you’ve worked to build your business, and we want to help you protect it from the uncertainties that life brings. Learn how our business success planning and small business insurance can help ensure the success of your company!