July 1999 Issue


By James Olan Hutcheson, ReGeneration Partners

To many, a family business means conflict. Although family feuds often make headlines, it's surprising how many family-oriented businesses exist: About 75% of all business enterprises in the United States today are family owned and managed. This includes many CPA firms and, of course, a great number of their clients. Conflict is normal, and at times routine. It's only when conflict is not managed in a positive way that it becomes a destructive force. As an independent advisor, it is the CPA's role to provide sound advice to the family business, both from a financial and a practical perspective.

Managers of family businesses should reflect on their successes but never lose sight of how they can improve. Advice for a winning family business includes the following:

* Choose leaders that live a balanced life--not all work or all play.

  • Communicate regularly--establish a system that fosters both playful and serious talk.

  • Agree on the business purpose and have clearly defined business goals.

  • Plan, plan, plan--strategic, marketing, estate, disaster,
    financial, etc.

  • Share power--everyone that can add value should be allowed input. Not all decisions should be made de facto by the majority owner.

  • Preserve entrenched traditions--every family has traditions, whether planned or not. Traditions keep a family connected.

  • Hold similar values--big differences in some values make it tough to share a common outlook.

  • Compete in more stable markets and industries--ones not susceptible to fads, fashions, or trendy ideas.

  • Grow slowly--rapid growth is difficult to manage.

  • Remain small to medium in size--pressures mount when a family business tops the $2 billion mark.

  • Have strong and capable competition--monopolies do not succeed in a free market.

  • Exude passion for the business--think beyond getting rich and, instead, emphasize the family legacy.

  • Know your customers--it's common for successful businesses to have longstanding personal relationships with customers, vendors, and business partners.

  • Respect governance--in order to grow, a company's leaders must be open to objective evaluation and feedback. A board of directors or advisors works wonders for a family business.

    Conflicts in any business are inevitable. It is important that owners and managers of family businesses recognize their uniqueness. Family businesses should ask the following questions: Has the family enjoyed working together? Has the business performed as expected? What core values can be used to strengthen the business and keep the family close? *

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