Family Business – The 5 Biggest Issues and How to Solve Them
Family businesses often have a different set of challenges than big corporations. Discover how a business growth expert can help overcome them.
In today’s business environment, many people talk about separating personal and professional lives. Whether you’re an employee or a business owner, there has to be a clear distinction between the two.
But what happens when the two get intertwined? This is exactly the case with family-owned businesses. It’s impossible to separate work and personal lives, which can be both a blessing and a curse. While there are many benefits to working alongside your family, this can cause many challenges that are alien to corporate entities.
So, how do you minimise the downsides and get the most out of your family business’ strengths? This is exactly what ActionCOACH Chris Mackey devotes his career to. As a successful partner of the ActionCOACH team, he’s helped many family businesses deal with their biggest pain points.
Here you’ll see why family businesses can benefit from having a business coach to show them the way. But before we dive into that, let’s take a look at how Chris found his way into the world of family businesses.
Most family business owners have a strong entrepreneurial background. They come from a long line of business owners from whom they learn how to run a family business. More often than not, they’ll agree to continue the family’s legacy when the time comes.
This isn’t the case with Chris. His father spent his life working for someone else, though he’d always aspired to start a business. Only that he never managed to do it. This means that Chris didn’t have any experience around family businesses to draw from.
Instead, he became interested in it while working at an Australian wholesale retailer. During the 90s, a particular challenge steered Chris in the direction of family-owned businesses. At that time, there were 27 independent supermarkets in Australia. It was impossible for all of them to grow in the fashion of some of the biggest players like Woolworths or Coles.
For this reason, Chris got invited to defragment those family businesses and unite them under one banner. But there was an issue.
As you can imagine, nobody really wanted to give up their brand name. After all, it represented years of ups and downs in their business and family lives. So the collective thinking was along the line of ‘We’re fine with it as long as you put our name on it’. However, this wasn’t doable.
Luckily, Chris managed to handle this effectively. Understanding the way family businesses operated, he found a way to connect with them on a deeper level. As a result, he played a vital role in the creation of IGA (Independent Grocers of Australia).
While he didn’t single-handedly invent it, his work was crucial for the organisation’s current success. He was in charge of funding, strategies, marketing, and many other key aspects of the new business.
Three years later, Chris decided to give up his job and get into business coaching. When he looked over his list of clients, he realised that they were all family business.
Since then, Chris has been a business coach to many family-owned businesses that needed guidance. Let’s take a look at some of the main challenges that he’s managed to help them overcome.
1. Lack of Awareness
Generally speaking, family businesses don’t have access to relevant information the way other businesses do. For this reason, they may come to believe and subscribe to certain misconceptions even if the evidence shows that these things don’t work.
One of Chris’ clients had this very issue, which stunted the growth of their business. Namely, they believed that all it took to succeed was hard work. It wasn’t until they turned to a business growth expert that they realised that this wasn’t the case.
Hard work is paramount. And a business can survive and do well without strong work ethics in its workforce and principals. But while this is a necessary aspect, it’s not enough for meaningful business growths. Instead, you need to have processes in place that will ensure that your hard work pays off.
Chris’s client ran a home renovating business. This was the third business they started after the previous two failed. Luckily, they realised that things needed to change and called in a business coach.
When they first met Chris, they saw that it’d take much more to run a business than the work they’d been putting in. Chris introduced them to many processes and systems that they weren’t previously aware of. These included marketing, budgeting, people management, and creating connections, just to name a few.
They also became aware of the importance of having a clear vision and mission statement. No business can thrive without them, as there has to be an ultimate goal for a business to work towards. Only then can you develop a strategy that will fall in line with that mission and create success.
Once they started implementing Chris’ advice, the business started to flourish. It went from a paltry $40,000 revenue and barely any profit to $50,000 in net profit in just 12 months. Of course, this is just the beginning and they’re still working with Chris to grow the business even further.
2. Resistance to Change
There are many generational issues that can hold back family-owned businesses. In most cases, they lead any given business in two different directions. The first one is conflicts between family members. Successors believe that they should do things differently while older generations can’t wrap their minds around it. This can create confusion in the processes and ultimately thwart the business’ chances of success.
Another one of Chris’ clients faced the exact problem. Having a ‘don’t fix it if it’s not broken’ mindset, they had trouble letting go of the old ways of doing things. This resistance resulted in stagnation, as it does in most cases.
The biggest issue here is the strong focus on the familial aspect of the business. People trust their parents to make good decisions. As a result, they believe that there’s no need to think differently. If their parents didn’t have or use a system, there’s no need for them to have one either.
When this is the case, a business growth expert plays the vital role of getting those who call the shots to change their behaviour. Their job is to make sure that people transition from a rigid mindset and start thinking differently.
This is exactly what Chris did for his client. There are a number of ways to get someone to change their age-old behaviours.
Chris does it by forming relationships with clients, which you may agree to work best. A good business coach knows how important it is to have a strong connection with their client. Without this, there’s very little that they can accomplish.
The goal here is for a business coach to get the client to see them as a trusted advisor. The client needs to trust their coach to make decisions that will benefit their business.
Of course, Chris found a way of connecting with his client to make this happen. It’s something that he’s away been good at, long before he became an ActionCOACH. When he was still working at his paid job, his marketing campaigns helped the business turn over $6 billion. He kept making enviable amounts of money for them before he decided to go into business coaching.
He managed to do thanks to the relationships he made along the way. It’s one of the most important things in today’s business environment. After he managed to do the same with the aforementioned client, he was able to help them steer their business in a new direction.
3. Roles and Responsibilities
This is probably the biggest issue affecting family-owned businesses. Working in a familial surrounding can create a lot of confusion regarding who does what and when. Of course, the reason is not having a proper system that defines and spells out the responsibilities of every family member.
Chris points out that having job descriptions can solve a host of issues related to this. First of all, it helps identify those who don’t do anything. Chris has seen many family businesses that have at least one member who’s just along for the ride.
You can see that in one of Chris’ clients who worked in real estate. In the family business, the nephew didn’t play any role but was on the payroll. As a result, this was hurting the business as a whole.
Chris believes that it’s necessary to document everyone’s responsibilities to find those who don’t have enough or any. When you do this, you can either assign tasks to them or let them go. Having people that don’t contribute but rely strictly on family ties is no way to run a business.
Another reason why this is important is clarity. Chris has seen many family businesses struggle because the members rely on others to get certain jobs done. As a result, nobody does it on time. A good business coach helps such businesses understand and document each member’s role and responsibilities.
Here’s how Chris does it. He relies on the following template that has proven to work:
|Employee Name||Employee Number|
|Position Title||Business Area|
|Reports To (Position)||Date Plan Effective|
Note: For all managers with direct reports, one Key Accountability must be ‘People Management’ with a weighting of 25%.
|Key Accountabilities (max 5) (Does)||Weighting %||Key Performance Indicators (What)||Targets (When)||Mid Year Result||Year End
|Employee Signature||Manager Signature|
As you can see, the template clearly divides everybody’s contribution to a business. A family business can have much-needed clarity and ensure that everyone is on the same page. As a result, everything will get done much more efficiently and effectively, and the results will follow.
4. Lack of Respect
It goes without saying that the values of a family business differ greatly from those of corporations. Unconditional support, loyalty, and love are among the dominant values of a family business. Respect, at least when it comes to business decisions, isn’t high on the list.
This lack of respect can surface in many situations. Successors might not respect the family heritage and act in a way that contradicts the business’ vision and core message. Because of generational gaps, they might lose touch with the parents and try to take the business in a different direction. While this can turn out to be a smart move, it will likely have negative results if carried out without proper business mentorship.
If more than one person in a business is in charge of making major decisions, the inability to command respect can severely hurt the business. Family or not, every business needs firm leadership. If the leaders lock horns on a regular basis, they can drive the business into the ground.
Fortunately, Chris has extensive experience with this, which is among the most common seen in his clients’ family businesses. In such a situation, Chris believes that one person should just buy the others out. There’s no rationale for all of them to stay if their actions are hurting the business.
Of course, there are many times when it doesn’t have to come to this. A good business growth expert can help the leadership understand the value of respect. While they might not hold everyone by the hand and make them live in harmony, they can give valuable pointers for them to coexist and make the best of it.
Think of a buyout as a last resort. In many cases, you can do something to fix the relationships in a family-owned business.
5. No Exit Strategy
How do you know when to admit that your business is dying? This is definitely something that people don’t want to think about. Instead, they’d grasp for straws trying to salvage their business. Or maybe the business is doing great but you’re ready to call it a day and pass it onto someone who might do an even better job.
These are the hard decisions to make. And they’re even harder when it comes to family-owned businesses. Again, a difference in values is to blame. While the play callers in corporations make rational decisions based on figures, family businesses don’t always do the same. They let their emotions influence their decisions.
However uncomfortable this might be to confront, Chris believes it’s necessary. Every business needs to plan for the future and have a contingency plan.
You have a few things at your disposal. First of all, you can just leave the business to your successor. It’s important to make sure that they have the skills and resources necessary to continue your legacy. Work closely with them for some time before you decide to do this.
Another option is to sell the business. If there’s nobody in your family who can take over, this might be the way to go.
Lastly, and this is something that nobody wants to think about, you might have to close up shop and walk away. There comes a time when there’s really nothing you can do anymore, and this might be your only option.
Of course, if your business is highly successful. You can also look into selling it.
What’s important is to have an exit strategy and know when to execute it. You need to know the indicators that it’s the time to get out. This is something that a good business coach should be able to help you with.
Chris considers this a hugely important aspect of family business coaching. He never judges someone’s exit strategy, but he does make sure that they have one. If you don’t know how to go about this, it would be best to turn to an expert for help.
Can Your Family Business Benefit from a Business Coach?
As you can see, there are quite a few issues that are much more common in family businesses. If you aren’t able to deal with them the right way, they can cost you a lot, including the business altogether.
By taking a close look at the mirror, you can see whether any of the above issues apply to your own business. There’s a good chance that some of them do to some extent. If you see one or more of these problems, working with a business growth expert can be your safest bet.
They can help you to put in place systems and processes needed to truly understand what it takes to succeed. In addition, they can help you draw clear distinctions between each member’s role and responsibilities. Lastly, you can learn how to sense and recognise when it’s time to get out of the game.
With the help of an ActionCOACH business coach, you can deal with the above as well as many other issues that might stunt business growth.