Starting up any kind of business means a lot of work and dedication. It may be rewarding, but it also poses some risks and challenges along the way. About one-third of these new businesses fail after one year of operation. However, we can avoid failure if we know the proper process in building the business and being with the right people to help us get through it.
Like any business, a family-owned business requires the steps before starting up.
- Find a Business Idea
You must be able to identify the market for your products or services. Your business should go around with something that the whole family is interested in. There may likely be a difference in opinions about which business to start with. But perhaps, to make it easier among family members to decide is to base it on something in demand. All family members are willing to learn and, if must, undergo training and attend workshops and seminars.
- Realize how much you would need to start up the business.
The cost to start the business needs to be very well discussed. Identify everything that needs to be paid before starting the business- registration, equipment, initial inventory, etc.
- Look for the reliable suppliers from which you will purchase your equipment/ initial inventory.
Build a good relationship with your suppliers. They usually give discounted prices when you buy in bulk. Research where you can purchase inexpensive yet reliable equipment for your business.
- Designate positions.
Provide each family member involved in the business-appropriate tasks so that every department is well cared for. Hiring employees to work on the back office jobs may not be needed right away. But it is still best that all family members know the “ins and outs.”
Just like other businesses, it has advantages and disadvantages. But try to focus on the benefits of having this kind of business other than getting scared of its drawbacks:
The advantages of having a family-owned business:
1. A family-owned business is usually run by either parents or the eldest of the family. The longevity in leadership makes a company stable. The company leader usually stays in the same position until such life events as health issues, retirement, or death.
2. The family gives more support in sustaining the company because the company’s loss would mean total destruction of their means of living. There are commitments and strong cooperation among family members, which may not be equaled by non-family companies. The responsibility benefits the company regarding stronger customer relationships, a more organized company, an effective sales and marketing strategy, and a better understanding of their industry
3. The company’s success is in the cooperation among its family members in building and assuring that the company runs smoothly. Since it is a family corporation, everyone is expected to step up if one member is unavailable. There is the willingness to always help no matter which department is involved.
4. A family-owned business thinks of a company that will last several generations. Their long-term goals are far different from those of non-family firms that focus on their quarterly outcomes.
5. Some family members are willing to shell out from their own finances if there is a need to cut costs.
6. Katipunan Bank, whose main branch is Dipolog City, is a family-owned business. Its current president shares a portion of his monthly income among its employees that serves as an incentive for them each month. They do not just save money by giving allowances to their employees. Building a solid relationship with their employees is the secret to why the bank has emerged into more than 30 branches in Visayas and Mindanao.
The disadvantages of having a family-owned business:
1. Family disputes are always likely to happen. They are more challenging to solve and can lead to unresolved issues. Deep-seated disagreements may affect the whole organizational structure when family members have continuously clashed.
2. There are issues of not complying with the rules imposed on a company that some members may most likely break. The painful consequence may lead to the complete closure of the business.
3. A family-owned business does not necessarily mean just having family members in the company. Sometimes having “outsiders” in the company can help make changes and improvements for the company. The reluctance to get new ideas from others and become part of it sometimes are the biggest mistake of family-owned businesses. They see others as intruders, or they just could not put trust in them.
4. Another painful issue among this kind of business is the refusal of a member to step down from his position. There is a fear of “passing on the crown” to another family member because the next in line might not be as effective as the previous family member.
Conclusion: there should be a compelling long-term vision that will enable the succeeding generations to continue the legacy. In as much as having conflicts among members can be a scary scene, choosing a business to be run by a family can be a good option. Before starting the business, it is best to resolve family issues that might cause more significant problems in the future.
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You may contact Armando “Butz” Bartolome for questions and more information.
By email: aob@gmb.ph
FB Page: Armando Bartolome
Linkedin: https://www.linkedin.com/in/franguru/
Website: https://www.gmb.ph
