Dealing with Family Business Dynamics Part 2

November 08, 2017

I wrote a blog a few years back giving tips for how to approach some of the unique dynamics that are in place in running a family business. I’ve been reflecting some more on this subject lately and felt the need to revisit this topic and explore it a bit deeper.

The particular dynamic that I’m interested in exploring now is how to align varying ownership goals and interests that different owners have. While this can be a challenging issue for any business, it may be even more common in family-owned businesses, especially ones that have been passed down two or three generations. The reason for this, in many cases, is that the owners of the company were brought together by their family relationship rather than a common vision for what their company can or should be.

As company ownership gets passed further down the line and the number of owners increases, it becomes increasingly important for owners to communicate and discuss strategy with each other, whether or not they are involved in day-to-day operations. In many cases, bringing in third party advisors to conduct strategic planning sessions may be necessary.

The first step in the strategic planning process will be to affirm the company’s vision, which will require owners to agree on a direction for the company to move in. Should the company reinvest profits to expand or maximize distributions to owners? Eventually opportunities will arise for the company to grow or move in a new direction, and ownership will need to be on the same page in order to make a decision.

So how can owners reconcile their differences of opinion and move the business forward? They either need to compromise and find a middle ground or look into the possibility of buying out owners who don’t want to move in the same direction as the rest of the company. This can be a touchy subject, especially when family dynamics are involved, so it’s important to emphasize that the family and the business are separate. Family members who sell their ownership stake in the company should still be invited to family gatherings and company events and should still feel that they are part of the company’s legacy.

 As we all know, the nuances of each family’s dynamics mean that there is no one-size-fits-all approach here. If there’s one piece of advice I can give that would be near-universal here it’s that communication is the key. Without clear and honest communication between owners, strategic planning sessions won’t be effective and the business is unlikely to progress in a way that is satisfactory to any of the owners.

About the Author

+Tim Peters is a consultant with Morrison & Company, providing business valuations, business planning (including budgeting, cash flow forecasting, strategic planning), feasibility studies, interim controller services, recruitment, competitive grant writing and special projects that don't fit into any conventional category.  You can contact Tim directly at tpeters@morrisonco.net or via telephone at 530-893-4764 ext. 208.

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