The Family Business: the solid foundation for building personal wealth

By: Analyst advisory team  (part 1 of 3)

So often you come across business names such as James&Jane Enterprises or Ssalongo & Sons Ltd, the first thing that comes to mind is that this is a family business or a partnership based on closed relationships. Come to think of it, the majority of small and medium size firms driving the economy from trade, processing to professional services are family businesses, and yet everyday people approach businesses so professionally that they forget this underlying truth that the driving force behind these businesses is the relationships or families that start and run them.

When some of the biggest names in business today like Wal-Mart stores (Walton family), Ford Motor Co (Ford family), AIG (Greenberg Family), Madhvani Group of companies (Madhvani Family), come to our mind we may forget that they were and are still family businesses, but have deliberately moved to build businesses employing hundreds or even millions (1.14million employees in Wal-mart stores) and generating billions in revenues, with brands respected world over. Research show that over 90% of businesses world over are family owned.

The question we should all be asking ourselves then is: What did the above companies do different? How did these families build large corporations independent of the families that own them? And how can we then borrow a leaf to create success stories of our own? The real truth is that these businesses were first successfully run family businesses that gained considerable independence from the families that owned them and then grow to big corporations.

The initial goal of the business

The success and growth of every business greatly depends on the goals the business set out to achieve at the beginning, if you follow classical historians like Alfred Chandlar companies exist to exploit the benefits of being big, in other word at the onset the goal is to grow into big corporations and remain profitable and efficient. The challenge with most family businesses is that the alternative/side income goal and providing for the family tend to over way the growth initiative, this makes the businesses fall into the trap of only providing income to run the family and employment to family and friends.

 These kind of goals tend to manifest out of actions and not as written downs goals, so when directors and owners of family businesses set out goals on paper they should the follow this with actions to create an environment that communicates growth and efficiency in the utilization of all resources to the employees and family members, the business translating into a source of income to the family should then be a secondary goal (resulting from the business growth and profitability). Crafting this independence for the business at the goal setting stage will go a long way to providing guiding principles on how the business is managed financially and strategically to foster growth.

The rules of engagement

Over the years most mirages have tended to bring together couples with complementary strengths, situations like a worm and welcoming customer friendly wife and a strict and very debt collector like husband. Stories like these have been very helpful in helping many small businesses remain afloat and cut operating costs as a start up, as these businesses derive these complementary strengths at the beginning, married couples should also remind themselves that marriage was never and can’t be designed as a business venture that follow strict polices on financial management and periodic performance appraisals. These virtues though are necessary for the growth of the business. As the business grows therefore joint management by the couple should reduce while a more suitable and passionate spouse takes the leadership role of steering the business through start up to the growth stages. This will create an enabling environment for growth, accountability, efficiency and a positive and motivating workplace for employed non family members.

Keep an open and clear line of communication

Communication is the key in any business, but in a family business it is very crucial to success. Communications on roles, responsibilities, and expectations of family members in a business should be clear from the start and both parties should be in agreement on this position, this applies both in circumstances where you are co-owners or one is employee. This sets clear communication channels in the company for all including non family members employed and also avoids some members from taking things like performance, code of conduct or even company property for granted. With clearly communicated and agreed vision for the business, family members tend to stick around to see it achieved even though they may be hard times.

Logic Vs Emotions 

The truth of the matter is it is difficult to be objective when dealing with family mostly in hard situations and yet in real world these situations will arise. Things like hurt feelings and getting defensive comes in and the time given to look at problems in a logical perspective ignored.  When it comes to delegation and promotions or even reward and punishment these emotional tricks come to play, in situations like these asking yourself questions like, “How would I handle this if I were dealing with a non family member?” time and again and allowing your mind to derive the most logical answer gives you the best solution, the more you handle these situations rationally, the more your mind gets the logical training you need to grow a family business that can survive even when the family is in hard times.

The family only time

When two married couples set out to build a business or even siblings doing business together, the tendency to discuss business all the time or carry business feuds back home and even worse taking home feuds to the business place is very likely. While you busy building a business, don’t forget to build the family. Things like family dinners out or even for couples vacations together is very important so long as you get to bond as family forgetting the business for a while. The result of this will be better for both the business and the family because when the family is together and strong the business will be strong too but the reverse may not be very true always.

It is also fair that as a family business may be a bit complex to run, you don’t need to ignore the professional ethics main stream business use and try as much as possible to let the business stand and run independently and based on sound values and goals so that talent and other resources from outside the family can easily be tapped and utilized to foster growth.