Family businesses can be a great source of pride. After all, family members pour their time, financial resources, and hearts into these kinds of entrepreneurial endeavors. While they come in a variety of shapes and sizes, family businesses all maintain single family ownership. It can be difficult to keep a family business in the family. Along with the other challenges any other business can face, there are struggles that can pop up for family businesses in particular. Here, we will discuss some of the more common mistakes made in family businesses in the hopes that you can avoid them and have your family business continue to thrive for generations to come.
Avoid these Common Family Business Mistakes
When you work with your family and want to work with your family, there are some assumptions you may not even realize you are making. For instance, in your desire to keep as much of the business management within your family, you may not realize that some of your family members are not very adepts at making business decisions or having a role in management. It may be difficult to accept that a family member who wants to be involved in the business and who you want to be involved in the business may not be best suited for the role but failing to recognize this can jeopardize the entire business endeavor. In this kind of situation, you may want to look outside of the family to retain the most qualified business leaders to fit your business goals.
Oftentimes, family businesses start as small businesses. The business may start out of a home office with just one or two people working to keep the business alive and growing. When this is the case, it can be a big temptation just to keep business and personal finances mixed up. After all, much of the business is likely to be funded through personal finances. Continuing to mix up personal and business finances, however, can end up putting your personal assets at risk. Those who try to go after the business may also try to go after you personally. Separating things out can protect your from incurring personal liability.
Another big mistake that family businesses make is failing to put a succession plan in place. If you want your business to be set up for continuous growth and success far into the future, a business succession plan is critical. This is especially true if you want to keep ownership of the business within the family. Your business succession plan can take into account how you want the business to transition in the event of future turnovers in key staff, such as an owner passing away. If you want certain people in your family to assume specified roles in the company, putting it in the business succession plan can not only help make sure that happens, but can help manage and prepare the entire business when the transition comes around.