Spare a thought for family businesses this festive season
Christmas is a time for families. But this festive season, spare a thought for those in family business. They may not be getting into the festive spirit with quite the same excitement that the rest of us enjoy.
You may think that family business is a rather specific topic - but did you know that 70% of Australia's businesses fall into the category of family business?
This is the first of a three part series on family business. Recent surveys have shown the biggest concerns in a family business - money, management and moving on. We like to call them the Three M's.
Let's start off with money. A well-run family business often represents the major family asset. It's well known that money is a cause of many marital arguments. We would suggest that family business is in the same situation - but with many more people involved!
Here are our top three tips for avoiding money meltdowns in your family business.
1. Be transparent.
While some confidentiality of financial matters is required, trying to hide things from other family members is a sure fire recipe for disaster. The resentment and suspicion will inevitably lead to major rifts, which must damage the future of the business.
Whether this involves independent audits or merely allowing the financial records to be reviewed by family members will depend on the circumstances and the complexity of the business.
Transparency will also encourage honesty and fairness where finances are concerned.
2. Be even-handed.
In a recent KMPG survey of family businesses, 51% of the sample surveyed said they paid their family members at the same rate as the rest of their staff. However, a huge 25% reported that they provided 'family compensation' in excess of regular pay!
There are no legal issues here - as the business owner, you can pay whatever you want (providing it's above Award rates). However, the resentment and issues that would arise should you pay family members more than regular employees (for comparable work) are simply not worth it.
The key here is to keep it real and be fair - if you want to pay family members more, do it in less obvious ways! Think dividends, additional super...there are ways! But you must keep at least a semblance of even handed-ness.
3. Keep business and personal assets separate.
Being a family business, it's easy to think of company bank accounts as a family bank account. The temptation to use business funds to cover personal expenses is very real and often the cause of cash flow shortages.
Legitimately paying yourself wages or dividends is totally above board - nobody expects you to work for free. But if you find yourself tempted to dip your hand into the till, it is time to review your personal finances and establish a more sustainable living style!
Properly managed, family business can be a great source of wealth for you and future generations. If you don't have money management skills already in the family, seek assistance from a trusted advisor who can guide your family through the money minefield.