Preparing to run a family business
Taking over the family business can be a great opportunity, but it can also come with its share of challenges. Here are some tips for making this transition a smooth one.
Inheriting a family business may seem overwhelming at first, especially if you don't have any experience running a business. The key to success is identifying the potential challenges you may face and developing strategies to overcome them. Consider these tips to help prepare yourself for your new role:
Form a team of advisors. If you have limited managerial or entrepreneurial experience, consider enlisting help from a group of advisors. This group could include lawyers, accountants, and business and wealth planning advisors. You want to assemble a team that can provide you with objective and holistic advice, and help you brainstorm business strategies.
For instance, if you wanted to hire more staff, you'll want to know if the business's current finances could accommodate additional employees. Since you may be unfamiliar with the business's books, consider consulting with a financial advisor who can advise you on the financial aspects of creating the right hiring approach. It's critical to surround yourself with a team that can give you knowledgeable advice in several areas. More and more, business owners realize that a single advisor may not be able to do it all.
Position yourself as a leader. As the new manager or owner of your family business, you may be the subject of envy among family members. They may feel resentful that they weren't chosen to take control, or may not be satisfied that you have what it takes. In these cases, communication amongst family members is key. Take it upon yourself to set up family meetings where you discuss what's happening in the business and how other family members can be involved. Position yourself as a leader at these meetings, but also involve other family members in researching certain topics or ideas and coming back to report to the family members at the meeting.
Also, develop "rules of the road" or a family participation policy for family members who want to work in the business. For instance, you can require family members to meet certain educational levels or qualifications before they're given roles within the business. By opening up a line of communication, but also setting boundaries, you're positioning yourself as a fair and judicious leader – not only in your business, but also in your family.
Get feedback from employees. Employees who have been working at the business for several years may be resistant to a change in leadership, in part because they feel like they will have to prove themselves all over again. To help ease this transition and resolve any resentment, identify and interview key players in the business. Ask them about the business's strengths and weaknesses, and where they see the company going in the next five to 10 years. This process will help you acquire useful information about the business, and will show your staff that you respect their feedback and are willing to listen to their concerns.
Plan strategically. After inheriting a business, it's easy to get caught up in the idea that everything needs to be changed right away. Instead, understand that change takes time and consider following a step-by-step process.
First, examine the strategic vision that your predecessor had for the business. For example, is the company positioned as a niche player, or perhaps a low-cost producer in the industry? Now ask yourself how this vision correlates with your own plans for the business. For instance, maybe you want to develop a stronger online marketing strategy or implement green business practices. Spend some time working through both plans to develop one cohesive vision.
Next, determine the options for financing this vision. Options could include bringing in new partners for capital, using existing retained earnings, or taking on low-cost bank debt.
Third, assess the talent – your key managers. You want to determine if those employees have the ability to carry your strategic vision to fruition over the next 10 to 15 years. By taking the time to work through this process and become more familiar with the business, you should be better positioned to take charge and implement changes.
Succeeding as a new business owner requires a lot of time and careful planning. Be sure you're prepared and open to feedback and advice from those around you. At any stage of this transition you may find it beneficial to reach out to advisors that specialize in business succession planning and can provide valuable resources to keep your family business running smoothly.
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