How to manage the family business: 7 golden rules

Aug 6, 2022

Level: General

Reading time: 4 min

Success and prosperity rarely come by themselves; you need to work hard to deserve it. This also applies to the family business, you will not get good results if you do not pay due attention to the organization of all processes (financial, behavioral and managerial). We have collected seven useful tips for you on how to manage the family business with the greatest efficiency — check them up!

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Choose the right type of business

Contrary to the misconception that a family can do everything together, this is certainly not the case — the type of business will affect efficiency. Analyze the market and find out what types of services are in demand at any time, which of them will not be affected by the development of technology, and which will look great as a “family product”. The one that easily stands the test of time and has few competitors is your #1 prospect.

Fun fact: Some of the most popular family businesses 60-70 years ago were photographer services and typewriter maintenance. However, the development of technology has forced such family businesses to wind down.

And this is the main argument why the business should be timeless to be efficient. In addition, it is worth thinking about continuity — the chosen thing should be such that it can be passed on from generation to generation, building a family “empire” step by step. Then the value of such a business will be much higher.

Common vision and purpose

What is financial due diligence?

Another important clue on how to run a family business successfully is to clarify the common mission and purpose with all members. Suppose a family produces craft wines, and the son wants to sell the highest quality alcohol on the local market, the mother dreams of world recognition, and the father just wants to get as much money as possible — this is a bad example.

So, it’s necessary that each family member knows about the mission of their mini-company and shares a common goal, then it will be much easier to achieve it. Write short- and long-term plans to make the understanding more specific.

Discipline is above all

Don’t go easy on yourself or other business executives just because you are family. Lack of discipline is the first problem in building a common thing because in this case all tasks and plans will be carried out frivolously, work efficiency drops, as well as the quality of products. That is, the business leader is obliged to monitor discipline and punish/remove those people who disregard their duties.

7 golden rules of trading

Everyone has their own trading style, but some principles are critical for success. Make sure you’re following these basic rules of trading.

Pay attention to team spirit

Avoid times when one or two people do all the hard work and the rest just make a profit. Try to share charges equally or do tasks together — equal responsibility increases team spirit. In addition, all critical issues should also be discussed and solved together, and this is an important nuance of how to take over a family business.

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Quality over compromise

The secret to building a successful business with great profits is no compromise. Yes, the family connection is a tempting reason to do some tasks slipshod or not as planned in advance. But this is also a significant mistake. Never compromise when it comes to product quality because such concessions will make your life a little easier, but also, they will reduce the work efficiency and make the competitiveness of the goods or services produced suffer.

Spend part of the profit on learning & developing

Without additional professional development of employees, it will not be possible to improve the family business, as well as increase the client base and profit. It should be borne in mind that the dynamics of business will constantly change due to some global events (such as the coronavirus pandemic or military conflicts), the development of the chosen area, or the emergence of competitors.

That is why a family should spend a certain percentage of their income on improving their skills — this is an investment in potential development and increased profits.

Saving culture

And, of course, when talking about how to grow my family business, we must not forget the saving culture. When receiving the first profits, it is worth carefully discussing with relatives what percentage of the earnings will be set aside regularly, how much money all of you will have for free-spending, what saving methods you will have to resort to, and so on.

This habit of cherishing the profits made is a very useful skill for people running a small business because with its help it will be possible to resort to investments for additional passive income from other sources.

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