The family business-What you should know about it

By a definition, a family business is a business in which one, two, but often much more, members of one family have a significant ownership interest, together with responsibility commitments towards the business.

Family company is not necessarily run by members of one family. It can be owned by unmarried couples or friends. There are also small businesses which are ownership of two families, of two individuals whose relatives become employees. In these cases it is very important to document your business relationship in a formal business-partnership agreement. The document should include duration of the agreement, partners’ capital contribution expectations, and divisions of profits and losses.

There are different types of this kind of business. Sometimes it is managed by an individual which is not member of the family. Sometimes, in smaller companies all employees are relatives. Sometimes the business owner, when spreading the business, keeps his/her relatives on the management positions while the rest of employees are not related to the individuals which owns the company. But, they all have one thing in common. Relatives are involved in the operations of the company in some capacity. This is the strong basis for the carefully run and successful business, but also for many conflicts and difficulties with strong effects on both, family relationships and business.

Statistics show that less than 30 percent of these kind of businesses survive to the second generation, and just 10 percent hold on through the third. On the other hand, many contemporary public and even international companies were once family businesses. Therefore, when starting or continuing your family enterprise, there are many challenges and complications you are dealing with, but there is no problem which couldn’t be solved if you stay focused and motivated.

Experts say that key issues for one successful family business are trust, strong family values and open communication. Get everything out upfront, draft contracts and have discussions where you dissect every possible business scenario. Discussing crucial issues right in time can prevent stress and conflicts that may come afterwards. Meetings, planning and exchanging experience and ideas on regular basis will have a positive influence not only on your company’s effectiveness, but also on the relationships within it. Making a clear definition and agreeing about it will keep your company on a right way. Questions like What are we expecting and hoping to achieve? should be brought at the very beginning and reanalyzed in the moments of changes, crisis and success.

Draw a clear line between private and business discussions. It is natural to feel need to talk about business problems when you’re home after work, but that can provoke more damage to both, the business and family. Try to separate your private-family talks and business ones. This is very often and serious difficulty because company’s problem becomes a part of family issues and vice verse. There is time and place for each of them.

Keep in mind that each family business is unique and complex in its own way. Therefore, if you want to give your business a kind of personal mark, it is good idea to consider what you believe that makes your family unique and is there a way to project that on your company’s presentation. This kind of original mark can also be positive for your competitive edge, while paying attention on what makes you, as a family, unique, through this process, will make a good impact on your family’s relationships.