Running a business comes with all sorts of unique challenges, and if yours is a family business, those hurdles are likely to be even more personal and impactful.
Indeed, there are countless benefits to having a family business, such as:
- A lifelong relationship with your co-workers, promoting deep trust
- A shared vision for the future of your company.
You might think that, as a family business owner, your specific challenges are not relatable to the issues most business owners face.
However, in 2020, the House of Commons Library published statistics showing that 85.9% of private sector businesses are family-owned. This means as of that year, businesses like yours contributed £575 billion to the UK economy, and employed 13.9 million workers.
The report revealed that of the family-owned businesses in the UK, 75% were sole traders, and 21% had between 1 and 9 employees.
So, as it turns out, most businesses could benefit from learning about the challenges family companies might face, especially those who employ both family and non-family in the business.
Luckily, if you are in need of guidance as a family business owner, you are in the right place. At DBL, we can listen to your goals and worries, and offer financial planning advice for someone in your unique position.
Here are three tricky challenges family businesses face, and how to overcome them.
1. It can be challenging to maintain a healthy work-life balance
Whether you are a sole trader or a small- or medium-sized family business, work-life balance can be hard to achieve when your company is enmeshed within your family dynamic.
Indeed, a study of 1,000 small business owners and decision makers published by HR News found that only 13% said they had a “good” work-life balance. Couple this with the added family dynamic, and you could find yourself talking about work, and even continuing the workday, out of office hours.
If you relate to the feeling of constantly being “on” and talking about work with your family, it could be time to set some healthy boundaries.
One helpful way to distance yourself from work conversations could be to take up new hobbies, either individually or as a family, that have nothing to do with work. This could be a healthy way to enjoy yourselves and get much-needed downtime away from “office mode”, and might remind you that there is more to life than running your passion project.
2. Family businesses can be both attractive and risky for new employees
If you are looking to attract new talent and expand your family business, it is important to understand the unique position you are in.
Your business might thrive off being run by your “clan”, but when you invite other individuals into the mix, you need to understand how your position as a family company might affect your management style.
From the perspective of a new employee from outside the family, there could be both huge benefits and worrying downsides to joining a family-run company.
Some advantages you could emphasise to new employees include:
- A friendly, non-corporate atmosphere at work
- A united vision among management that reduces miscommunication.
However, some less appealing aspects of your business an outside employee may be concerned about are:
- The tight-knit nature of your working relationships that might alienate an “outsider”
- Work conversations, including important decisions, happening behind closed doors
- Feeling lonely as a non-family member, both at work and socially.
So, if you are looking to hire non-family employees to grow your business, it is important to remember how those individuals may feel when entering a family office environment.
Championing inclusivity, trying to be welcoming, and keeping work conversations within the office can all help make a new employee feel like part of the team.
3. Estate plans and long-term business strategy become intertwined
Finally, one unmissable challenge you will face as a family business owner is the intertwining of your personal and corporate legacy.
Individually, it is important to begin estate planning as early as you can. This process is crucial if you wish to:
- Protect your wealth from an unnecessarily high Inheritance Tax (IHT) bill when you pass away
- Shield your assets from being depleted if you become too ill or injured to work
- Help the next generation thrive after you are gone.
Simultaneously, you will also be required to make a legacy plan for your business. There are numerous options to consider when thinking about the future of your company, including:
- Selling your business when you retire
- Appointing your spouse, children, grandchildren, or other family members as your replacement
- Passing full ownership of the business down to a family member, either when you retire or if you pass away
- Dissolving the business entirely.
In combination, these two essential elements of future planning can become stressful. Shouldering both a corporate and personal tax bill, consulting family members on your choices, and ensuring the most profitable outcome can be a huge load to bear.
Fortunately, working closely with your family, and discussing your personal wealth with your DBL financial planner, can make later-life planning more exciting and less overwhelming.
However and whenever you decide to pass the torch, we can help you prepare for a retirement you deserve, while assisting you in protecting your personal wealth from anything that comes your way.
Get in touch
For a conversation about your financial future with your family, get in touch with us today.
Email email@example.com or call 01625 529 499 to speak to us today.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate tax planning or estate planning.