In 1991, Gerald Ratner wiped £500m off the value of the family business, Ratners Jewellers, with one much-maligned speech.
He said, “We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say because it’s total crap.”
The company very nearly collapsed. Approximately one year later, Ratner resigned. And the group changed its name to the Signet Group – for obvious reasons.
Most business mistakes are nowhere near as catastrophic, but there are lots of common pitfalls that can jeopardize long-term success.
Last week, I covered 6 of these pitfalls; in this week’s article, I round off the mini-series with five more.
1. Skipping Important Steps
Even if family members work for you, follow the rules. Pay taxes, give real paychecks, and protect them as the law says. Keep proper records for everyone. Fairness is vital.
2. Keeping Everyone Motivated
Make sure every employee, family or not, feels motivated. If non-family employees see family members getting special treatment, they may not stay loyal. Keep everyone inspired to build a united and committed team.
3. Hiring Just Because They’re Family
Blood shouldn’t be thicker than water when it comes to hiring. Bringing a family member on board because you feel pressured can lead to bad hires. Stick to hiring skilled, enthusiastic individuals – family or not – to avoid problems further down the line.
4. Knowing When to Step Back
Being there from the start doesn’t mean you have to stay forever. Think about stepping back if:
● The business stops your growth
● It gets in the way of life progress
● It hampers your personal goals
Your business should keep you excited. If it doesn’t, it might be time to move on.
5. Legal Protection Matters
Pick the right legal setup for your family business. A corporation often offers the best protection. It keeps personal assets safe. Explore legal options to prevent family members from getting in trouble because of business issues.
Running a family business is rewarding but it isn’t easy. As we’ve discussed over the last two weeks, there are plenty of pitfalls lurking around the corner, ready to jeopardize your business.
I can show you how to better manage finances, plan for the future, and resolve disputes, protecting the success of your family business for years to come.