How to Structure a Family Business

How to Structure a Family Business
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If your goal is to pass your business on the next generation, listen up. Your leadership in your business right now, is the reason why you’ll be able to pass your company on to future generations. There are many reasons why build a family business, is appealing. You might want build something with your children, work with family members you know and respect, as well as creating a foundation for generational wealth. There are processes you need to structure to give your children the tools to one day take the reigns of your business.

I interviewed Family Business Expert, Barry Banther, Senior Partner at Banther Consulting Corporation. Barry is a leadership development expert and bestselling author who has worked with hundreds of large privately held companies on developing generational leadership. He also works with Fortune 100 companies to develop leadership training programs. Oh, and: he runs a successful family business.

Challenges in Running a Family Business

It’s not a shock that problems can arise when you’re working with the ones you love. It can be tough to draw the line between professional and personal relationships, and that can seriously impact your family dynamic. Barry offers this advice, “Only discuss work at work, and table work-related conversations once you’re in a social setting with family members.”

Communication is essential for the success of your family business. Not expressing something that’s bothering you will only make it fester, and eventually it will come out in a destructive way. Words hurt, but you never want pass up a teaching opportunity. “Family businesses fail most often because of an inability of family members to communicate and work together constructively,” he says.

Not having defined roles can create confusion. Don't let everyone just pitching in, Barry encourages business owners to have defined roles and job descriptions for everyone (so that everyone is clear on his or her job within the company. You also need clearly defined performance goals for each position. Pay each family member a salary rather than letting them take from the till. And avoid giving family members positions simply because they’re related to you. “Being a family member gives you the benefit of being able to apply early for a job, but once hired, your performance expectations must be just like everyone else and any promotion based on results and not DNA,” Barry says.

Each family member should have a success plan that encourages them to achieve their highest potential, and it should be one that is based on sustainable high performance over a period of time. You also want to develop this plan with them to gage who might be interested in running the business some day.

Tips to Ensure Your Business Survives

While you might want to encourage your kids (while they’re young) to want to take over your business, that might not be the best path for them or the business. Some families require children of the owners to go to college and work for someone else at least two years before coming back to work for the family business. Barry suggests that you should encourage your children to discover their own talents and skills, and then give them the resources to help them succeed. If those skills lead them back to the family business, great. If not, don’t force it.

He warns, “Enticing or requiring family members to take over the family business only breeds resentment.” It can also hurt the morale of your existing long-term employees who may be far more qualified to run the business. Maybe you have a brother, an uncle, or a distant cousin who would be a great addition to your team. if you truly want your business to succeed, only bring on those who have skillsets that will make your company better.

Vet Your Estate Plan Carefully

Barry also discourages business owners from leaving their children a business in their estate unless they’re sure they will want to take it over, because that will almost always ensure business failure. He offers a better approach to passing down a business, “Create an environment where your children can earn ownership through sweat equity or a cash investment. What we earn we value, and what we value we grow and protect.”

Do The Hard Work Up Front

Family businesses are difficult to run and sustain, given the nature of people. You must allow everyone to discover their own strengths, and then see if it fits a role needed in the company. Family is family, but business is business. You always want to fair to the business and the rest of your employees. Running a family business can be rewarding, but it requires deliberate

planning, training and diligent work on your part as the leader of the business. Put in the effort to make sure there’s effective communication, set boundaries, institute merit-based promotions, and hold everyone accountable. And if you do your business could go on for generations to come.

This was originally published as How to Build a Successful Family Business on

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