How a Virtual CFO Can Help You Keep the Peace in a Family Business

Around 20% of all small businesses in the U.S. are family-owned businesses, according to the Small Business Administration. A family-owned business is one that is operated by at least two members of the same family and one where the family has the majority of ownership control of the company. Just as things can get a bit complicated on the personal side of family, things can also get complex when a business enters into the equation. Bringing on a neutral third party, such as a virtual CFO, can help you and other co-owners in your family successfully make a plan for your company’s growth and success with as little drama as possible.

Keeping Family and Business Separate

Family-owned businesses often have difficultly keeping work and personal life separate. Unless the company is solely staffed by people who are also family members, it’s important to keep a separation between family concerns and business concerns. Although it can be difficult not to "talk shop" at family gatherings or holidays, it’s important to build a wall between personal family life and business family life. This is especially true if people who aren’t part of your family work for the company and have important decision-making roles. You don’t want to discuss company matters outside of business time, come to an important decision and have the non-family person responsible for a particular issue feel as if decisions were made behind their back.

Setting Appropriate Compensation

Determining how much to pay the people who work for your business can be challenging enough when they aren’t your sibling, offspring, or cousin. Add a familial bond in the mix and setting an appropriate salary and benefits package becomes more fraught. One way to ensure that people are paid fairly and in line with the general market rate for their skill level, education, and the expectations of the position, is to keep all emotions out of the process. If possible family members shouldn’t try to negotiate salary with each other.

It’s also vital that people earn similar salaries for similar jobs, whether they are the boss’ kids or not. A virtual CFO can evaluate and review your company’s compensation structure and suggest changes to make so that people are paid for what they actually do, not for their relationship status. 

Deciding on Leadership

If you and your cousins or siblings regularly argued over who was in charge when you were growing up, you might find yourselves with the same argument, only with considerably higher stakes, if you run a company together as adults. Choosing a leadership structure and deciding who will be the boss or who will be responsible for what early on is essential for your company’s success. A virtual CFO can work with your company to help you map out its structure and to help you determine a leadership framework that works best for it. It might be the case that each member of the family takes on an executive role in the business, or it could be that one family member is the sole owner and CEO of the business. The structure that will work best for your company will depend on the personalities and professional goals of each family member who is part of it.

Successful Succession Planning

What’s next for your family’s business after the founder or current owner retires? You don’t want to have a generational fight on your hands, with the owner’s siblings fighting the owner’s children for leadership or a majority stake in the company. On the flip side, it could be the case that no one in the family is particularly interested in buying out or inheriting the business. A virtual CFO can help you plan for the company’s future before the issue of succession is a pressing concern. They can help you decide if passing on the company or selling your stake in it to a family member is the right choice or if selling the company to a third party is a better option. 

A virtual CFO can help you navigate your family’s business with confidence. To learn more about how New Direction Capital can help you keep your family business above water and help you keep the peace with your relatives and co-owners, contact us today.