Dec 13

Family Business – Facts, Myths and Challenges



How to Have a Merry Family Business Christmas! 

The ingredients for success in life could be - aim high, work hard and love your family…but what if these elements seem categorically opposed?  


In our latest blog, we take a look at the highs and lows of family business and why it can sometimes make for some interesting family Christmas gatherings.

  

The Hard Facts  

We all know the old saying “never work with family or animals” or is it “children and animals” either way there is no denying things can get messy on all accounts. 


The statistics indicate that many of us don’t heed the warning with approximately 70 percent of all businesses in Australia categorised as a family business.  


The data may indicate the actual rewards of working in a family business (such as flexibility and a sense of team work towards a mutual goal) outweigh many of the pitfalls. 


However, it is important to consider the following facts in relation to family business: 


  • - The Third Generation Curse - It’s believed that well over half (some report up to 70 percent) of family businesses fail or sell before the second generation takes over and up to 90 percent of family businesses fail or sell before the third generation takes over. 

 

  • - Immunise Your Business with Planning - The survival statistics need to be put into context. It is important to realise it’s up to you whether you create a successful multigenerational family business or not. It isn’t so much reliant on the statistics as it is on being aware of the pitfalls and planning ahead to avoid them. 

 

  • - Reactionary Change - The reason so few family businesses survive to the third generation is they lack planning and communication. They predominantly fail when they let family conflict and emotion drive change, rather than relying on proven strategies.  


Fail to Plan and You Plan to Fail!  

Like all things in business – the key to a Merry Family Business Christmas with no carving knives flying at the dinner table is in the planning.  


As well as the normal challenges of running a business, family businesses face specific issues around managing the complex relationship between family and business. 


It’s standard to advise you not to bring up the succession plan for the business over the fourth bottle of shiraz prior to the Christmas pudding. 


The hard discussions in relation to family business need to be treated with as much care and consideration as you would in the preparation of the Christmas turkey.  

  1. You need to put it all out on the table early enough for the appropriate thawing process.  
  2. Do your research and always follow a tried and proven recipe.  
  3. Take the time to properly prepare and season every element.  
  4. Keep the temperate at the perfect level. Never let things get too hot or go off the boil. 
  5. Give it enough attention, basting it throughout the entire process, for the perfect result.  

Warning - rushing the process or not giving it the care it deserves at each critical stage can leave it dry and a bad taste in everyone’s mouth. 


Are ‘What ifs’ Ever Useful? 

‘What if’s’ are never useful if you are only looking back at a situation gone wrong in your family business. Applying them to the possibilities for the future and in your overall business planning is a useful exercise.   


What if there was no need for uncomfortable family business discussions and bad feeling to be an element of our Christmas Day traditions? 


Wouldn’t it be perfect if we had the foresight to take the time to access the assistance available to have open communication and consultation on those hard business conversations before Christmas Day? 


Get Help to Keep the Harmony 

Sometimes ‘keeping it in the family’ is not the best idea especially when it comes to the difficult milestones and decisions in family business. A fresh outside opinion and some expert guidance can make all the difference to the outcome. 


MBC take a whole of business approach assisting clients not only to meet their obligations, but also to grow their business. MBC work with clients to reach both business and personal financial goals via mentoring, coaching and advisory services.

 

We focus on the big picture and the whole life-cycle of your business from starting out, the growth phase, establishment and expansion to maturity and exit.   


Give us a call today to see how we can help keep the harmony in your family business. 


MORE ABOUT FAMILY BUSINESS – Check out the Top 10 Tips for Family Business Success below and stay tuned for an upcoming blog which deals with one of the most intense issues we see facing our family business clients at MBC - Successful Succession Planning - The Make or Break for Your Family Business. 


Top 10 Tips for Family Business Success 

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has put together their top 10 tips for family enterprises: 

  1. Leave work at work and home at home. 
  2. Have clear roles for each family member. 
  3. Pay the award rate to all family members who work there. 
  4. Use outside advisors for unbiased advice. 
  5. Have a good management structure - don't confuse ownership or inheritance with management. 
  6. Be open with communication - both good and bad news must be shared. 
  7. Clearly outline the entry and exit conditions for family members involved with the business from the beginning. 
  8. Develop a succession plan and make sure that all parties agree on the transfer of ownership. 
  9. Hold regular meetings and family 'retreats'. 
  10. Use mentors and family business forum groups as a sounding board.