It is coming to that time of the year, Chinese New Year festival. This is the year of rabbit and it arrives early for 2023.
This month we will focus on family business which is quintessential to most start-ups, sole-proprietor to a private limited company as most people turns to family members and/or friends to be their partners-in-crime.
Over the past 24 years, we have had our fair share bit of dealing with family businesses and their challenges. Here are some examples:
Family members start young and small. They are appointed as junior executives and work their way up to the top management level and eventually take over the role of their parents or relatives.
The untimely death of family members forces their children to take over the businesses but they do not know how to run the business and are forced to shut them down.
Working with family members and/or friends sometimes causes friction due to the weight of business events that polarise their relationship. Sometimes these challenges can cause the break-up in bad terms. No Chinese New Year gatherings for them anymore.
Oldest family businesses
It is worthwhile to note that family businesses fail to perpetuate beyond a generation. Only 30 per cent of all family businesses make it to the second generation and only 3 per cent last for more than four generations or beyond.
However, Houshi Ryokan, dealing with hotel of Japan dates back to A.D. 717 and is a family business spanning over 46 generations. Out of the total 5,000 companies in the world that are more than 200 years old more than 60 per cent are in Japan.
Bad predicaments of family businesses
While it is better to not wash dirty linens in the public, this is often not the case like so:
There is a so-called rule, 3rd generation will lose a business.
Per one of the articles above, Not unique to China; the same sentiment is expressed across multiple cultures, from Japan (“rice paddies to rice paddies in three generations”), to Scotland (“the father buys, the son builds, the grandchild begs”) to even here in the U.S. (“shirtsleeves to shirtsleeves in three generations”).
Solutions
One way, to settle problems associating with other family members, relatives and friends is to have a separate business created. In some cases, whilst the business owners are still alive, he/she creates a partition or even offer money for those who are keen to set up another business, whether of the same nature or different nature. The companies set up can even be subsidiaries.
There are cases where former employees set out and set up on their own like the story of how Intel was started by a group of engineers who worked together for the same company, Fairchild Semiconductor. As such, there are companies that encourage their managers to open up businesses and be client-vendors. My ex-boss who was with the management of Big 8 accounting firms, was given jobs from the existing clients to conduct special audit of steel mills. It keeps my boss happy, the accounting firm happy and certainly the client happy. Consider that.
Another way, is to have 3rd party consultant to help close the gap that makes parties go to war. Instead of concentrating on personal issues - focus on organisational goals and the dividends. If Party A is in, what's in for them? If Party B is in, what do they want? Sort out who wants the leadership role first. Have trade-offs. Those who didn't get to lead, may get a certain guaranteed payment no matter how good or bad the business is.
At the end of the day, everyone wants to survive and to do well in life.
I wish you Happy New Year, Happy Chinese New Year and Happy Prosperous and Healthy Year 2023.
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