Do Not Make These 3 Mistakes in Your Family Business
Starting up a business is challenging. A helping hand from your family can reduce this difficulty to a great extent. It is natural to collaborate with them when you think of venturing into uncharted territory, and there is nothing wrong with that.
Problems only arise when we forget to demarcate between family and business. When we fail to set a clear boundary, the customers, clients, and family members suffer as much as the company does. To prevent such a dire future, avoid these most common mistakes people usually make in family businesses.
1. Not preparing the successor
After building a business from scratch with our blood, sweat, and tears, it is not easy to think about leaving it. So, it is no surprise that most family business owners fail to do succession planning. This can be a costly mistake.
The quicker you realize you need to find someone to handle the business in your absence, the better it is. Having no capable successor can wreak havoc in more ways than one — from family fallout to complete business shutdown.
Whoever you choose as your successor will need time to learn the ropes of the company. Both team members and clients will have to trust this person, which also requires time. So, start planning early to ensure a seamless transition for everyone.
2. Not keeping the family and business finances separate
Family businesses often start on a small scale, for instance, as a side hustle or hobby that later begins earning steady profit. As a result, people tend to treat it as part of the family instead of a separate formal legal entity.
If the business runs into trouble, that will affect your personal finances. The company’s bad debt can bankrupt your family along with the business itself. Forming an LLC (limited liability company) or a corporation is usually a preferred choice for safeguarding your private assets. It helps keep your family and business incomes separate.
3. No clear employment strategy
Employing staff is a tricky area for family businesses. Should you only hire people from your family? Or should you only find people from outside to prevent potential biases? The situation can be stressful.
Most founders want their children to learn all about the company. Who better than your flesh and blood to look after the legacy you created? As a result, many family members are welcomed to the organization without possessing the necessary skills.
This practice can be harmful. Whether recruiting outsiders or acquaintances, the standard should be the same. Furthermore, after onboarding, both should be treated equally. At the end of the day, your company should be the priority when making any business-related decision.
A simple action, or the lack of it, can have a lasting impact. However, simple does not mean easy, not always. When you already do a certain thing a certain way, it may be hard to break the cycle. Hard, but not impossible. So, be cautious about whether you are making these 3 mistakes. If yes, then take action and make sure your family business can thrive for generations.
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