Saturday, September 24, 2022

9 Important Rules In Family Businesses That You Should Learn

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Are you starting to manage a family business or in line to inherit an enterprise your retiring parents are currently handling?

Indeed, family-run businesses can be more complicated than running a conventional corporation. They often run with extra layers and dimensions of authority, sensitivity, and unwritten rules not customarily found in typical businesses.

Most probably, it’s that succession thing that prompts families to hand over the business to their descendants — no matter how disinterested they are — to get their feet wet and acquire first-hand experience instead of hiring someone with relative know-how and bring lifeline and continuity to the business.

Here are some of the essential rules that taking over family-run businesses usually adhere to and follow for a smooth transition:

Let your skills and interests be known.

Running a family business is not for everyone. Some of our relatives are keener for roles as employees and work with their passion and interest, say arts, engineering, or social welfare. However, such skills and capabilities may find a good fit in the business your family is running, so you can still be part of the company in a lesser capacity while pursuing things you want as an employee elsewhere.

Know your roles and responsibility.

If your hesitation in taking over the business is because you have no prior interest, be it known to whoever handed it over to you — most likely your parents — what you need to do and be responsible for. Once they know your concerns and cause of hesitation, they’ll be able to do hand-holding and ensure that you get the grips at a pace you can manage.

Understand your line of authority and its limits.

If you inherit a business with a proven process that has been in place for a while, you usually don’t want to fix what’s not broken and disrupt things. However, you may notice some processes can be improved and streamlined.

Do you have the authority to hire more people to increase production or fire those deemed incompetent to do an efficient job? Understand your de facto job description and suggest its scope based on what you can and cannot do.

What truly drives many family businesses is the sense of connection and identity the owners and their family members feel with the business. – How to Manage a Family Business

Distinguish who are your allies and who can do the job.

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Sibling rivalry, favoritism, and other forms of family-specific politics involved in running a business can be a poison that will undermine your leadership and ability to steer the business forward. While you may be leading your family business, you cannot do all things by yourself. You need to delegate tasks, and this can be tricky, especially if you don’t get along with them well.

Who is in charge of reviewing the finances and managing vendors? What about building relationships with employees? Get to know who are your allies, but be sure they also do the job right. After all, this is a business and not a political party.

Get to know the business very well before making drastic changes.

Unless it’s a sinking ship that needs righting immediately, it would be wiser to understand how the business works, who are the primary and secondary target markets, who are the existing and emerging competitors and what are the glaring problems and challenges the industry is facing before making any changes.

Sometimes, leadership changes in any business can bring anxiety to stakeholders. Employees fear new business strategies would lead to layoffs. New leadership might bring in their unique set of vendors and dismiss existing ones.

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Having enough knowledge about the business always brings out the best in everyone, and fresh ideas infuse new energy. Those that don’t work are pulled out and replaced with better ones.

Listen and value your parents’ advice.

This advice cannot be overstated enough. While parents belong to a different generation and their conservative ideas may look outdated, your plans of expansion and focus on a different side of the business seems like a light bulb moment, take a moment to project things from their perspective. Parents have been in the business longer than you do and have dealt with challenges throughout the years.

While implementing your ideas is expected as you take over the reins of leadership, listening to parents is not just a polite formality and sign of respect, but also a way to seek their thoughts and a healthy way to set the succession plan smoothly.

Plan on managing relatives who have a stake in the business.

In a family business, some relatives own a portion of it and have a say in its affairs. However, things can get nasty, especially during a time of succession when installing new leadership, and others feel usurped of the roles they thought they deserve.

Some family-run businesses have relatives leveraging their ownership by getting privileges (priority in the delivery of goods and freebies, for example) in exchange for something (lower compensation or longer working hours). A well-thought review of this compensation and roles should help you make informed decisions without costing the relationship.

Weighing the consequences of such actions should consider not only the bottom line of the business but its effect on the family or extended family for that matter, especially since it can be a traumatic experience to get fired by someone in the family.

Let’s remember that blood is thicker than water, and this is fairly evident in family-run businesses.

Assert your authority.

It is not unusual that the founder of the company, though aging and now has a limited scope of contribution to the business, quickly gives up control of the business. We should understand that the company is the founder’s baby, and the emotional attachment can be a great thing to overcome when it’s time to hand it over to a successor.

It would help if you understood this is proof that the founder has valued the company, and although you are in line to lead it from now on, winning the founder’s trust is a sign of you asserting your authority. He or she wants the company to succeed, and if he or she is not sure it’s achievable without their guiding wisdom, it’s hard to let go.

You will need to know how to gain trust and confidence and handle such delicate relations with other family members as you steer the family business towards a new era.


Taking over a family business can be the best place to work in. You are handling an established company that has long overcome growing pains, and not starting from scratch, where many startups eventually fail. You inherit a business process that’s proven profitable and has a steady stream of customers and clients.

However, family businesses can also be a messy situation to enter into, with conflict of interests, varying degrees of ideas, and clashing focus in the industry.

Having such rules above can help you integrate into your new role, develop solid relationships, and run the business with guidance from within a closely-knit family of entrepreneurs and support staff.

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