IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Victoria Greene:
How To Buy A Business With Your Family & Not Fall Out
Ah, the family business. You might be hearing alarm bells going off in the distance — but running a business with your family is no cause for alarm.
In fact, family businesses are at the heart of our economy: Family Enterprise say that up to 60% of US businesses are family-owned. Many successful businesses have taken the family route on their way to becoming household brands.
If you are looking to start up a business with your family or buy an existing one together, follow these simple rules to ensure peace and prosperity.
Set clear roles & goals
In a family-run business, personalities can easily clash. Family roles and behaviors that have been reinforced over many years can boil over into the professional environment. And trust me, no one wants to see the Sales Manager and the HR Director squabbling like siblings!
Goal-setting and fencing off responsibilities are smart ways to control the potentially volatile family business environment. If everyone can develop and grow within their own area of expertise, there will be no reason for ambiguity or role misunderstandings.
- Job roles and responsibilities are essential. You need to have a watertight division of responsibilities so that people are able to thrive. Knowing who is responsible for what task will help core business processes like invoicing and HR run more smoothly. Don’t fall into the trap of having completely informal job roles and responsibilities.
- Goals and business planning will ensure that everyone is on the same page as much as possible. Having open conversations about the direction the business is headed in the next 5-10 years will ensure that everyone is singing off the same hymn sheet. Conflicts in business often tend to come from a fundamental misunderstanding of how to grow the business. Decisions on what equipment to buy, who to hire, and how to invest will all be reliant on long-term business goals.
Money-making is at the heart of any business, so you need to ensure that you have a solid financial strategy in place. Money woes tend to be the #1 reasons for difficult conversations and arguments, so it’s a good idea to get this one right.
- People have different financial & investment styles, and that’s OK. From a conflict management perspective, it’s important to keep in mind that there is no “one right way” to do everything. In fact, a blended approach to finances may actually be a good thing for your business.
- A financial director or consultancy firm can help provide some structure if things seem a little too erratic right now. Getting some figures down on paper can help quell any anxieties.
- How much money do we have to invest in a new business? That’s probably one of the biggest issues to iron out when buying a business with your family. Some members may want to spend a little more on a premium outfit, whereas more cautious members may want to just start by buying a website and testing things out before investing in a team or real estate. A compromise could help keep both camps happy.
Be careful with culture
In a family, certain behaviors might be acceptable, but in a business setting, you have to be careful not to end up with a toxic culture. Blaming other people, passive aggressiveness, and over-the-top emotions are not part of a healthy business dynamic. Especially if the business is a mixture of family members, and staff — you will need to work extra hard to create a great culture.
Businesses that get a lot of support and business from the community are usually the ones that also treat their staff well. Making your business into a great place to work doesn’t cost you that much — and you will end up saving on staffing costs thanks to the loyalty you’ll create. Develop some employee engagement strategies and bonus programs as part of your business takeover deal.
Hire in talent
It can be tempting to try to keep everything ‘in the family’, but it’s important to know when it’s time to bring in the professionals. Whether it’s business valuation, bookkeeping, logo design, or website development — some things are best left to the experts. A badly executed job may end up not only costing you money, but also damaging an important relationship.
Nowadays, it’s easier than ever to outsource and hire in talent from elsewhere. Part-time lawyers, financial directors, HR managers, and social media executives can help your family scale your business fast. Especially in the early days when some people are still likely to be juggling roles and responsibilities, outside talent can help you launch the business quickly.
Move with the market
Understanding your audience when you buy a new business is essential. You haven’t got the same privileged access to the early days of the business, so you need to work extra hard to fill in the gaps. Getting on the phone with clients and customers, interviews, and in-depth data mining should help you decide how to ‘pitch’ your brand.
If you have bought an ecommerce website, trawl through the reviews, customer data and sales history to find out more about what customers think about your products and brand. Is there an obvious improvement you could quickly implement? What are market sales figures telling you? Where should you be looking to find your brand advocates?
Know when to move on
Once you have your business, that’s it right? Not entirely.
If you want to create a legacy for your family, you need to think of a potential exit, or at least succession, strategy. This is about planning for your family’s future, so start thinking long-term from day one. Do you want to be bought out in the future? Here are some ways to achieve a higher market value — it makes sense to increase your business equity by as much as you can.
Working with your family is an incredibly rewarding experience, and probably no more complex than working with people in general. Just be sure that you understand and appreciate your family’s unique dynamic before you jump into the deep end and starting running a business with them. And bring in the experts in to help your family find the perfect business for you!
Victoria Greene: Writer & Digital Marketing Specialist
Now that I’m freelance, I love spending my days writing, learning more about digital marketing, and sharing my tips with fellow entrepreneurs. I live for digital and am always on the lookout for the next big thing. If you have questions about this article or would like to contact Victoria Greene she can be reached at (312) 957-4726 or firstname.lastname@example.org.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.