By Frank Fantozzi, an EO Cleveland member and President and Founder of Planned Financial Services
The family business model can be extremely rewarding for entrepreneurs, especially when it comes to creating a legacy that brings about pride, honor and family fulfillment. However, as family businesses expand, they face unique performance and governance challenges. As the founder of Planned Financial Services, I’ve always made it a priority to ensure multi-generational family businesses are able to succeed now and well into the future. That begins with understanding the key drivers of business longevity and following a few tips we share with the entrepreneurial families we advise:
- Maintain open communication. Communicate clearly, concisely, candidly and continuously. Open and ongoing communication is vital to building trust and creating a safe environment for all family members.
- Respect the business as its own entity. The success of the business must remain paramount, regardless of family politics or ties. How the business provides for the lives of the family members and employees it supports, and how it contributes to the surrounding community, should always remain top of mind.
- Eliminate emotion from decision-making. The business leader is ultimately the voice of the family business. He or she must assume and retain a position of authority, as well as the ability to make tough decisions for the sake of the business, even if decisions are not popular with all family members.
- Have a plan to deal with family discord. Whether it’s a difference of opinion or a performance issue, dealing with discord among family members within a business setting can get complicated. Document lines of authority, roles, responsibilities and job descriptions with measurable accountabilities. Also, be sure to establish clear policies and procedures for dealing with conflicts that arise.
- Develop family business employment agreements. Employment agreements help you create clarity in each role by setting expectations, responsibilities and accountabilities.
- Create a board of advisors (directors). Perspective from outside advisors can help eliminate family biases and can go a long way toward helping family business owners resolve issues. The increased intellectual bandwidth can also provide a fresh perspective to challenge the business thinking, while helping the family business grow and prosper with insightful ideas.
- Separate personal and business finances. It’s not just common sense but also good business sense to separate personal finances from company finances. Employees notice if the company’s finances are used for personal pleasure, which creates an unhealthy business culture.
- Set expectations for family owners and non-family members with an ownership interest. Educate and create transparency for all interested parties where the company’s financial performance is concerned, including balance sheets, shareholder dividends and liquidity policies.
- Know when to let go. Staying on too long can hurt the long-term growth of the organization, discourage and frustrate potential future leaders, and can drive them away from the business.
- Identify the next leader and develop an executable succession plan. An effective succession plan—one that goes well beyond “blood is thicker than water”—is perhaps the most critical element of ensuring ongoing business success. In certain circumstances, it may require the organization to look outside the bloodline to perpetuate the family business.
Frank Fantozzi (pictured) is an EO Cleveland member, as well as the president and founder of Planned Financial Services, a financial and investment management firm that helps families and businesses use their wealth to experience the life they desire (Return On Life®). Contact Frank at Frank@PlannedFinancial.com.