A family business is a labor of love, but in order to survive, the business must also have love from (success in) the marketplace. This success can face challenges from co-owners, especially when those co-owners are family members or close friends. In order to preserve these important relationships, it is wise to take proactive steps to mitigate the conflicts that may arise while running the business.
Three tips that can help to better ensure the family business is strong enough to handle economic challenges include:
- Governance. It is important to have clear and concise governance documents. As noted in a recent article in CPI Financial, a publication that focuses on financial services news, corporate governance documents that outline things like the role, structure, and responsibilities of the Board of Directors, as well as standards of business conduct can help address conflicts before they arise.
- Boundaries. An article in Inc.com, a publication that advocates for small businesses and entrepreneurs, notes that it is important to have clear boundaries between family and business. Do not use business expenses for family vacations or have a business IT professional set up home offices for family members who are also employees.
- Succession. It is also important to address how the business will transfer to future generations. Have a plan that outlines retirement of owners.
These steps can help achieve two goals: (1) shield the business from conflict, and (2) provide a means to solve the conflict if it arises.
It is also important to note that it is wise for entrepreneurs to seek legal counsel when creating business governance documents and incorporating the business to help ensure the business can survive when confronted with challenges.