Working with family business can be tricky

It’s commonplace for SMEs and businesses to be family-owned and run, but there are several mistakes many people make when it comes to working with family.

Many people do not realise the dangers of not setting out clear strategies, principles and agreements when starting a business with family or involving family members in the business. Working with people you know and trust is an advantage, especially in a family-owned business, however, people can fall into the trap of getting comfortable and forgetting the importance of contracts to fall back on. They then find themselves in a difficult position down the track when tensions and problems arise.

Many business owners I work with to address and resolve family based disputes and issues find themselves facing stressful situations due to a lack of clear boundaries between personal and business relationships with their business partners or employees who are also family.

It is a real skill mastering how to separate your personal and work life, especially with such familiar people around you, but it has to be done and this is what I encourage clients to take on and incorporate into their businesses.

It can be a difficult choice to take a step towards resolution and mediation for conflict, whether between spouses, family members or in an intense workplace situation. When it comes to family business situations, and any business situation for that matter, what I stress the most is ensuring there are processes in place for open and fair communication to allow you to effectively solve tensions that may arise.

In the situation where issues have already arisen, it is important that sustainable methods are used to strengthen long-term family relationships.  This will bring real change for those involved to avoid the courtroom environment and the failure of a business.

There are some key issues which arise often in family owned businesses and these include:

  • Disputes between family members who set up the business together but disagree with the direction of the business
  • Disputes between family members over spending, allocation of profit, etc
  • Tension and problems associated with the involvement of family member partners, girlfriends, adult children – and their partners
  • Divorce, separation and claims over all or part of the business and its assets
  • Dealing with the long-term illness of a partner.

While I help many businesses to address and resolve family issues, I always recommend that a constitution be put in place which outlines parameters and guidelines around the involvement of family members. I also look at whether the business is structured in a way that reduces the risk of claims against the business. Collaboration with good legal and financial counsel is key at this stage of the game.

I recently worked with a business where the owner’s son involved his wife in the long-standing family business and when the son separated from his wife, the wife sought to include half of the business in the settlement.

Unless businesses are structured well, things can end very badly for business owners. Whilst it may take a little financial investment in the beginning to get the foundation right, it will pay off if something goes wrong up the track. Wisdom is doing today what you will be proud of tomorrow.

What many people don’t understand is that mediation is one of the most important aspects of business when issues arise. My advice to everyone is mediate early “conflict delayed is conflict amplified” Try and work with the other party to achieve a solution through mediation. Lawyers will then simply be able to assist you to seek ratification of the resolution and if necessary, ratification through the courts.

This will save a lot of heart ache and a lot of money.

But, of course, the best advice I can give is to ensure you are well prepared before any issues occur.