Family operated businesses are a common feature of the New Zealand business landscape.
As time passes the desire to build a legacy for future generations becomes more important, and the current owners become more aware of their responsibility to preserve the business, whilst maintaining a profitable operation.
With family businesses often the reasons for its existence is to:
- Provide for employment or financial needs of family members
- Provide a retirement sum for the current owners
- To build and maintain a legacy for future generations
This becomes harder to achieve when there are a number of family members spread over a number of generations.
Often ‘new’ family members or other close relationships are included in the family business operations.
Family businesses do create conflicts when decisions are needed – what comes first the business or the family?
The governance of the business can be informal, which does not allow for transparency or allowing all parties to contribute to the vision, values and operations of the business.
A family business can have advantages over other businesses in that there is strength in the family group, which allows these family members to share a commitment to the business, family members often work harder, family members are often more willing to reinvest profits, and a family is able to develop a strong culture.
However, whilst there are many positives of family businesses, family businesses can have their own specific issues. These issues can include:
- Family members not being able to get away from work
- Disagreements strain family relationships
- Emotional aspects can cloud decision making
- Transition to future generations is often more difficult than a sale to a third party
- Conflicts over how much each family member should earn
- Past deeds are never forgotten
- New family members
So how can these issues be avoided or reduced?
A tool which can be used is to have a ‘family plan’. This is a plan where family members agree on all the areas which have the potential for disagreements. A plan can seem daunting to start with and does require perseverance and commitment. However, once completed it sets the foundation for the business and family to flourish.
Spending time and effort now preparing the ‘family plan’ is a valuable investment in future generations.