August 12, 2019
Every business has its challenges. Family businesses can have even more issues if they are not well managed. The key to success in running a family-owned business is to operate it as you would any other business. The fact that family members work for you should not affect what you are doing and how. Close relationships and emotions should not stand in the way of making decisions that are right for the company.
Here are 12 tips for running a successful family business:
- Plan for your success. Develop a business plan. Include short- and long-term goals as well as the plan for how you will achieve your goals.
- Develop strong company values and base decisions on those values. Let your values guide your business. It will be easier to say “no” if something is not in alignment with your values.
- Establish clear roles and responsibilities. Write job descriptions for each position in the company. Include educational and skills requirements. Include information on what is required to move up in the organization. Develop an organizational chart to identify who reports to whom.
- Assign people to roles based on their level of expertise. Family and non-family members should be put into positions based on where they can make their best and highest contribution to the company. Avoid having employees in senior management positions if they cannot perform the required tasks or do not have the right temperament.
- Have a formal review process. Focus on the person’s strengths. Make sure that you do not “sugar coat” the discussion. If something is an issue, it needs to be addressed before it becomes a problem.
- Have open and honest discussions with everyone on your team. People need to hear the good, the bad, and the ugly. Employees are more engaged if they are fully aware of the company’s strengths, weaknesses, opportunities, and threats.
- Treat everyone fairly. Avoid playing favorites at all costs. Family and non-family members will appreciate that you do not give some family members special privileges. Establish rules to guide all decisions and stick to them.
- Plan for the transition of ownership to the next generation. Identify someone to step into your role when you leave the business. Start training them at least five to ten years before you plan to step away. Train them on being a leader, allow them to “shadow” you, and give them the opportunity to run the company a year before you leave.
- Develop a succession plan. People need to know what to do and how you would like it done before something happens to you. It will avoid a family crisis and allow for your intentions to be carried out.
- Have a clear exit strategy. Decide on when you will leave the company and do it.
- Keep family issues separate. Although this might be very difficult, the business will run smoother if emotions are checked at the door.
- Remember why you are in business. The WHY should guide your decisions – not the family.
Operating a family business can be very fulfilling. In most cases, you are doing the work that you want to do with the people that you love. Feel free to contact any member of our team with if you would like to discuss the operations of your family business at 610-828-1900 (PA) or 732-341-3893 (NJ). You can contact Rich Higgins, CPA, managing principal – New Jersey Office at
or me at
. We are always here to answer your questions.
Martin C. McCarthy, CPA, CCIFP
McCarthy & Company, PC
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).