There are profitable small businesses, and then there are thriving small businesses — companies that exist for decades (or more), becoming community staples, building a stellar reputation for products and services, and generating wealth for generations of families. How do they do it?
The longest lasting, most successful family businesses have several common operating principles:
- Defined goals. What are you working for? Building a business with your relatives is hard enough when you’re all on the same page. If your goals and objectives aren’t clear—and embraced by all—long-lasting success is nearly impossible.It may be time to revisit your vision and goals. A common purpose makes business decisions easier—every decision should further your goals. Consider holding a family meeting, facilitated by a neutral moderator, to update your mission, vision, and goals so that everyone is working toward the same end.
Note that these types of conversations can be difficult. Relatives at different ages and stages often see the world differently. Good listening and openness are essential to creating common priorities.
- Sharing the wealth. Family businesses are often the source of great financial bounty. They’re also the source of valuable wisdom. Both types of “wealth” are important.There are countless ways to share financial prosperity. Your trusted advisors can help you determine how and when to distribute wealth to your heirs in an equitable and tax-advantaged manner.
One way to continue sharing the wealth is to fund the next generation of entrepreneurs. A startup might be related to the existing business or take the company in a different direction. Either way, launching a new opportunity can underscore the challenges of starting a business—and teach all those important business lessons—in a fail-safe way, supported and nurtured by the family.
This type of endeavor also supports sharing the wealth of knowledge that family elders hold. Mentoring and guiding new endeavors can keep good business practices intact through generations. Everyone in the family benefits.
- Remaining relevant. It’s tempting for family business founders to stick close to what they know. However, the market keeps evolving. If your product or service doesn’t evolve with it, your company becomes a proverbial dinosaur.Avoiding this fate requires purposeful action. You and your family member executives must stay aware of trends and key performance indicators relative to your industry and your competitors. You must embrace what the market desires, not just in terms of your offerings, but also in terms of environmental, social, and governance (ESG) policies. Give your business every chance to thrive in current—and future—market conditions.
- Creating rules. Who gets to work in the family business? What level of education is required? Must relatives work elsewhere before joining the company? What is the family career path, and what are the expectations of family members’ performance?Talk about these and other family employment matters early and often so that every family member knows the rules.
- Working harder. Every successful business owner will tell you there’s no substitute for hard work and not cutting corners. While younger generations typically grow up with greater wealth than their forebears, the family of the future must be inspired to embrace the work ethic that delivered them such achievement and prosperity.
Focus on the Future
Building and managing a family-run small business is a balancing act, but by being thoughtful and deliberate in your planning, you can make your organization a trusted community resource that supports and provides for your relatives and heirs for generations.
Dembo Jones’ advisors don’t just specialize in your tax and accounting needs. Our experts can offer guidance at every stage of your small business and ensure you have the financial flexibility to endure challenges and maximize opportunities. Contact us today.