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- Working with your family to build and manage a small business comes with challenges.
- Having defined roles, job titles, and responsibilities is essential, one owner told Insider.
- Businesses should establish value statements and employment policies, another expert said.
- This article is part of "Small Business Playbook," a series exploring leadership challenges and the solutions that can drive growth.
Growing up, Matilda Reuter Engle always knew she'd work at her family's business, The Red Fox Inn & Tavern in Middleburg, Virginia.
As a kid, she helped her parents and grandparents with jobs such as washing dishes and unloading boxes and started working there full-time as a server when she was 16.
Today, Engle is the third-generation proprietor of Middleburg Hospitality, where she and her husband oversee the Red Fox and the private estate Glenstone Gardens, which have been in her family since the 1700s.
"It's really just a rite of passage to be able to preserve the lifestyle that our family has loved for so many years," Engle told Insider.
Her parents, sister, brother, and brother-in-law work in other areas of the family business, which includes an art gallery and private sporting grounds.
Working with family comes with its challenges, Engle said. Making it work depends on setting clear goals and boundaries, and everyone involved needs to share the same mission to carry out the family's legacy.
Family businesses are a major part of the economy. About 29% of employer firms are family-owned, according to the US Small Business Administration's Office of Advocacy.
They employ 60% of the US workforce and generate 64% of America's gross domestic product. While the study is originally from 1996, the figures are still widely cited by the SBA and the Chamber of Commerce when discussing the economic influence of family businesses.
Insider spoke with a family-business expert and a small-business owner about how to navigate issues in family-owned businesses.
Set boundaries between family and work life
Family-owned small businesses are a "lifestyle," Engle said. You have to set boundaries with your time and relationships to achieve your personal and business goals. You also have to take time for yourself.
For instance, Engle adjusted the Red Fox's hours of operation so it's closed one day a week and on holidays. This lets her have more time with her three children and gives employees more time with their families, too.
"You have to make sure that you have clear personal goals and structure your business to the best of your abilities to match those goals," she said.
Having clear, defined roles, job titles, and responsibilities for everyone in the business sets boundaries and holds people accountable for different aspects of the business, Engle said.
Photo courtesy of Jennifer Pendergast
Family-owned businesses blend family and workplace dynamics, so "the more clarity that there can be around expectations is important," Jennifer Pendergast, a family-enterprise consultant and adjunct professor at the Kellogg School of Management at Northwestern University, told Insider.
Businesses should establish value statements and employment policies to remove any sense of favoritism and level the playing field among all employees, she added.
Learn to handle conflict
Conflict is inevitable in a family business, and Pendergast said it's crucial to set up processes for dealing with it, such as creating a code of conduct or building skills to handle disagreements.
"Have family meetings, have conversations, be open to putting tough things on the table as opposed to trying to pretend that you're getting along," she said.
Talking through issues usually resolves them quickly, Engle said. She encourages her team to openly discuss problems and new ways of doing things.
Another issue is that there's a constant blur between family time and work. Engle's family often brings up aspects of the business when they're together outside work, she said.
"It will always be a talking point amongst your entire family," she said. "It's something you have to accept from day one because, in my experience, you will never be able to separate it."
Have a succession plan
A family-owned small business' longevity depends on planning for the future, Pendergast says. According to SCORE, 47% of family business owners who plan to retire in five years don't have a successor, and two-thirds of businesses don't survive the transition from the first to the second generation of ownership.
Creating a shareholder agreement that outlines who can own the business, who can sell shares, and any constraints on ownership and stock will help avoid problems when a business owner retires, Pendergast explained.
She also recommended establishing an advisory board, which can include outside members of the business community, to offer an "objective viewpoint" on a company's succession plans.
If you don't have to budget to hire an attorney to help draw up legal documents for succession planning or other aspects of the business, Pendergast suggested contacting business schools at local universities, local Small Business Administration offices, or your bank for free or low-cost assistance.
Keep a small business thriving for as many generations as Engle's requires looking at the big picture, Pendergast said. It'll ensure you're happy, doing what you love, and carrying on your family's dream.
"Have a big goal in mind and discuss your preference or passion for how to make that goal achievable or successful," Engle said.