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Disclaimer

This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.

 

Keeping it in the family

Four out of five Australian businesses are family-owned. While this can be a source of strength, it can also lead to complications that can intensify business problems. Philippa Taylor, the CEO of Family Business Australia, outlines some of the lessons learnt in mixing family and business life.

The idea of going into business with one’s spouse can be appealing - after all, who would you trust more than the person who shares both your bed and your cheque book? In Australia, nearly 80 per cent of business is family-owned, representing an estimated wealth of $3.4 trillion. Which goes to show that working with family can be extremely profitable - but the downside is that it can also lead to broken dreams and broken marriages.

Many of these stories - both good and bad come to our attention at Family Business Australia (FBA), which has been working in this area since 1999. Members of FBA meet in a confidential environment, and share their experiences for the benefits of each other. Many of the lessons presented here have been gleaned from these members.

Head before the heart

Those considering going into business with a loved one would be wise to consider the effect of combining that heady mix of love, power and money. Does previous experience suggest the two of you can manage it? Do you complement each other?

Assuming at least one of you has some previous experience, and you have done your market research on whatever venture you are planning, have you thoroughly ascertained what strengths you will each bring to the business and what your roles will be? Ideal partnerships are a combination of ‘ideas’ person and ‘detail’ person (often, coincidentally, exactly in line with the opposites attract theory that presages a successful partnership).

And there are other key points to keep in mind, for example, it is often easier to enter a business than to leave it (for whatever reason), so a good exit strategy should be part of your original planning. In other words you need to accept early on that the business may evolve with time and go through many stages, but in most cases you, the founders, won’t always be there to run it. So, plan how either one or both of you will make your departure, whether this is to be once the fortune has been made or when ill-health (or even ill-feeling) dictates.

This isn’t as negative as it sounds. For example, the business may become so successful that ensuing generations or other family members may wish to join it and carry it on beyond your (and your spouse’s) working life. Again, proper processes for managing this should be agreed upon sooner rather than later. An independent facilitator can be invaluable for working through these sorts of issues. Often, the process itself is as important as the outcome. By ensuring that all parties are given a fair hearing, that all their concerns are discussed and addressed, the business will begin on a firm foundation.

Step by step

When embarking on this adventure called ‘family business’ it is also necessary to determine, document and stick to the following:-

• Position descriptions and clear lines of responsibility
• Hiring, career development and promotion (or otherwise) for family members- if this is agreed at the outset, any personal (and therefore emotional) element is removed
• Managing and maintaining communications between family members, including mutual respect and shared visions
• Business continuity, including buy/sell/merge/alliance decisions.
• Maintaining and evolving family business values and goals.
• Managing change including technology, business processes and risk
• Preparation for retirement and succession, including encouraging, informing and training next generation family members
• Counselling, training, re-training, positioning and firing family members and
• Responsibilities and privileges, recognition of different needs and circumstances, remuneration, terms and conditions for working family members.

Again many families use an independent facilitator to establish, develop and manage these discussions at least at the outset. Meetings are usually conducted away from business with some families favouring the ‘family retreat’ concept, which combines fun with work.

Maybe you have reached the point where the partnership is suffering under weight of unresolved conflict. Sometimes, it’s a simple matter of miscommunication or (more often) lack of communication. Many facilitators will tell you that too often, issues develop because people assume and don’t confirm. None of us are mind readers, and the best way to avoid conflict is to take time out to talk to each other. If the issue seems unresolvable, it might be time to call in an adviser who importantly, has not only business understanding, but also experience in dealing with the emotional side of families working together.

Even the process of choosing an independent facilitator can be fraught with problems. In some cases, one or other of the partners might choose, for example a wise and trusted friend. The problem with this step is that the friends may feel compelled to pick sides, or give a ruling that leaves one party unhappy with unfortunate consequences for the friendship. If an independent facilitator is to be brought in, it is ideal to choose this person together. Both parties will be responsible for paying the facilitator giving total independence to process.

When to call it quits?

Stubbornness is not usually considered to be a good quality, but it is exactly this that can lead an aspiring entrepreneur to succeed: that determination not to give up, not to accept that something can’t be done. The downside of this is a failure to recognise when the cost is proving greater than the reward. This might not be purely financial.

Many couples will tell you that their business has had a negative effect upon their relationship; some even divorce, but remain in business together. Those wiser souls will tell you that nothing is more important than preserving the relationship with those we love.

Again, there is no insurance greater than a commitment to keep the lines of communication open, and if it’s becoming too hard- remember you are not alone, many have walked in your shoes before- and get professional help! So can you work with your spouse? Probably- but only if you commit to the sort of formal preparation and planning discussed above, gleaned, as said, from the wisdom of those who’ve gone there before you.

My Business March 2008

 


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