In 1962, two executives from Decca Records invited The Beatles for an audition. But they weren't very impressed. Two weeks later, they told the band's manager they wouldn't be signing them. The reason? "Four-piece groups with guitars? That trend is over."
Whilst not all business mistakes are as severe as this one, many other pitfalls can jeopardize long-term success.
What are these pitfalls? How can you avoid them? Let’s take a look.
1. Not Setting a Clear Hierarchy
One of the first mistakes within family businesses is not having clearly defined job roles. Family members don't want to report to siblings. Parents don't want to show favoritism. This can lead to confusion and disputes. What can you do to prevent this? Have the hard conversations. Make the best decisions you can. Then create an organizational chart showing who does what, and hold regular family meetings to make sure everyone stays aligned.
2. Mixing Personal and Business Finances
It's easy to mix personal and business finances. But it's a mistake. To avoid this, set up separate accounts for your business and personal expenses. And don't "borrow" business equipment for personal use and leave it at your house. While there many items can be written off as business expenses for tax purposes, keep it clean. Keeping things separate ensures transparency which helps to maintain good financial health and avoids family resentment or perceptions of favoritism.
3. Forcing Family Members to Join
While it's great to have family members join the business and continue its legacy, forcing them into it isn't ideal. Encourage them to explore their interests. Establish a company policy requiring all family members to gain several years of experience elsewhere first. This approach will help them make better decisions, bring fresh ideas to the table and help ensure your business doesn't become insular.
4. Overlooking Other Opportunities
Another common mistake is limiting your business' growth and/or recognizing your 80 year old family business is in a dying industry. So explore partnerships, mergers, or diversification to expand and stay competitive. Seek advice from experts/mentors who'll help you to evaluate your options.
5. Skipping Succession Planning
Planning for the future is vital. Create a succession plan that outlines who's taking over the business when you step down. Mentor successors and update the plan as circumstances change. At a minimum, have an emergency transition plan so the business does not flounder because the unexpected happens.
6. Letting Family Conflicts Become Business Conflicts
Family issues can spill into the business and create conflicts. Or business disagreements can profoundly affect family relationships. Talk to each other. Don't avoid the issues. The longer an issue simmers below the surface, the worse the consequences. Mediation, personal counseling or external facilitators can help you to keep the business moving forward and sustain positive family relation ships.
Running a family business has its challenges. But if you're a family business owner, you don't have to go it alone.
I can show you how to better manage expectations, plan for the future, and resolve disputes, protecting the success of your family business for years to come.