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5 Common Mistakes Advisors Make When Working with Family Businesses

By Kyle Danner - December 26, 2019

This blog includes excerpts from my book "The Advisor's Guide to Successful Family Business Engagements." Purchase a full copy of the book for more tips on how to manage family business drama, keep clients happy, and earn positive referrals.

I often work with other advisors who have family businesses as their clients. It’s not the same as working with other businesses. There are complex dynamics involved and you have to treat it differently than you would from other clients.

Yet many consultants approach both traditional businesses and family businesses the same way. As a result, they find themselves in difficult positions:

  • Caught in the middle of the family drama
  • Struggling to keep the family on task
  • Facing delays as the client doesn't meet deadlines
  • And even feeling confused about the true decisions makers

If you find yourself in any of these all too common situations, don't throw in the towel just yet. By avoiding the following mistakes, you can ensure the project stays on track and you maintain a positive rapport with your client. 

1. Not Respecting the Family Story

With an outsider’s perspective, family business advisors, consultants, coaches, and the like can see the relationship dynamics that interfere with business decisions. These include:

  • Family members are given jobs for which they’re not qualified for.
  • Sibling competition results in ongoing arguments.
  • Mom and Dad are unwilling to transition the business to the kids.

You may see these family business disputes and determine it’s your responsibility to deliver the truth. That’ a sure fire way to ensure your engagement goes poorly. Families may or may not be aware of their dynamics and they don’t want to be reminded of them either.

After all, how would you feel if an outsider delivered the "truth" about your own family (including the ways your own behavior isn’t helpful)?

Rather than point fingers at specific parties, keep observations on family behavior general. As you earn the family’s respect and trust, then you can dip your toe in the water with more pointed observations like how brothers Rob and Michael’s constant arguing is affecting staff morale.




2. Not Taking Your Personal Family Story into Account


Advising family businesses can trigger your own emotional baggage. Watching a father and son argue about the direction of the company can be a reminder of past arguments with your own father. Which side of the argument you were on in the past may color your advice.

Consider spending some time with a psychologist exploring your own family. I’m not suggesting years on a therapist’s couch, but just as your clients benefit from your outside perspective, you too can benefit from the outside perspective of another.

Or, consider joining a study group on family systems. The Bowen Center is one approach and offers online and in person training. Another option is an affiliate membership with the American Association for Marriage and Family Therapy.

3. Trying to Change Too Much Too Fast

Advisors have the advantage of being outsiders. We are able to see things others involved in daily operations cannot. Given this vantage point, the change needed is typically much larger than originally assumed. Often times, the problem is like an onion with multiple layers. Until the layers are peeled back, we don't see the extent of the problem.

This leads to a much larger list of changes, which can be overwhelming for a business-owning family. With all the talk embracing change, it’s nice to think that businesses can flip a switch and chart a new direction. But as human beings, we are notoriously slow to change. Add family dynamics to the mix, and it’s even slower.

Be thoughtful of how your plan for change is presented. Consider prioritizing the top items for change based on the most pressing issues. Don’t hide the other items, but acknowledge them and remind the family that they can be revisited at another time.

4. Operating at an Abstract Level

Many family businesses are first or second generation operations. The entrepreneurial spirit is strong so a lack of structure is common, even preferred. Transitioning from survival mode (What do I have to do today?) to long-term thinking (Where will my business be in five years?) is a shift that causes many entrepreneurs to struggle.

Therefore, long-range plans may not click. Be prepared to break down your recommendations into daily or weekly tasks that are easy to grasp. It will increase the likelihood of your recommendations being adopted.

5. Not Engaging with the Entire Family

When it came time for me to leave my family’s business, we engaged our attorney, as expected. At one point I asked what he thought of the agreement. His response was “Kyle, I can’t talk about that.” I was taken aback by his response.

business-meeting-handshake (1)

This man knew me for 30+ years and was a family friend. However, his response is understandable. He was exercising his fiduciary responsibility as the attorney to my family’s business.

For the record, I understood his position. As an attorney, he was practicing ethically and responsibly. As a family friend, he missed the mark. It was a failure on everyone’s part, including mine. While I was in the business, I should have been more engaged with him.

As an advisor, if you’re talking to only one or two members of the family, you’re not getting the whole story. Be sure to meet with others, including those not actively working in the business. Sometimes, retired parents, in-laws or absentee family owners, exercise considerable influence or at least can offer a different insight into the business and family dynamic.

Advisors should not avoid working with family businesses. The market and need for a variety of services are huge. Family businesses at any stage can benefit from sound, thoughtful advice. But to be successful, advisors must be aware and comfortable with the family dynamic.

Maintain Profitable Client Engagements for Years to Come

AdvisorsGuide-BookMock-Up3Working with a family business can be overwhelming, both physically and mentally. You must learn to balance the logical aspects of your project with the emotional strain the family members may be experiencing.

Fortunately, by avoiding the mistakes above, you can start off an engagement on the right foot and ensure it stays that way for the full duration of your project.

When it comes to working with family businesses, being prepared for whatever may come is often the key to success. And my book "The Advisor's Guide to Successful Family Business Engagements" is a simple way to do just that.

In this comprehensive ebook, you'll learn:

  1. Potential problems you may face while working with the family business
  2. How to understand and manage fear in the family business
  3. Where to start with a challenging family business client
  4. How to not get caught in the family drama
  5. The secret to a successful partnership

Purchase your copy today and gain the tools to keep your clients happy, engaged, and on track from start to finish.

Get Your Copy of the Advisor's Guide

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