Six Ways Advising Family Businesses is Different
By Kyle Danner - August 22, 2019
Many advisors who work with traditional businesses will have the opportunity to work with family businesses at some point in their careers. They often assume that all of their typical strategies and processes will work the same, regardless of whether the business is owned by a family or a single person.
Sometimes, you can get away with this. But other times, it ends up being more than you can take on, especially if you don’t know what to expect.
So how exactly is family business advising unique? What challenges could you have to face working with a family, and how can you navigate them and help the business succeed? These are the six top ways in which advising a family business is different from traditional business advising.
1. Parental Love & Ego Can Get in the Way
Parents want what’s best for their kids. It’s hard to see their kids struggle, even though they realize that’s how anyone learns and grows. When they see their children knocked around by life, they may jump in to save the day rather than letting the kids figure it out for themselves. If they do that too much or too often, the kids are unable to develop problem-solving skills and self-reliance.
Ego also comes into play with family businesses. Mom or Dad built a successful business with the family name above the door. They want their legacy to last so they expect or entice the kids to join the business—even when it’s not in the best interest for either party. Furthermore, to protect their hard work, they keep a tight rein on the business, never letting go of control. That keeps everyone, including key employees, from developing as capable leaders.
Tips for Advisors: Check your attitude towards the next generation. Resist the urge to label them as entitled, lazy, or incompetent. There are reasons why they are the way they are, much of it related to how they were parented. Realize that a parent’s tight hold also complicates your ability to do your job.
2. You'll Be Pressured to Pick a Side
As an advisor, you try to stay as neutral as possible. But when you work with family businesses, this can be incredibly difficult.
You either have a family meeting where it blows up right in front of you and everyone wants you to pick a side. Or, family members call you after and lobby you for the course of action they think is best.
However it happens, it puts you in an awkward position. You’re left feeling like you have to choose sides. And that’s a dangerous situation to be in.
Tips for Advisors: You may feel loyal to the business owner because they’re the one who signs your check but think of the whole family as your client. This can be a scary proposition because it may put you at odds with the one who pays the bill. But it also creates a bigger picture and presents more options to consider.
3. There Are Hidden Players You May Never See or Meet
When it comes to family businesses, not everything is as it seems. Family businesses retain a hidden hierarchy, and that hierarchy bleeds into everything from how decisions are made to how (or if) problems are resolved.
Sometimes, these nuances will be more noticeable. Maybe two brothers play “good cop/bad cop” during negotiations to give each other an “out.” That is, they position the brother not in the room as the bad cop, taking the pressure off of them to say “no.”
Sometimes, problems occur when you aren’t even there. For example, you may leave a meeting with the owner thinking you have a clear vision of the future only to find out later they changed their mind after talking to their spouse. You’re left confused and frustrated, wondering what you could have done better to keep everyone on the same page.
Tips for Advisors: Ask if it makes sense to include other family members in the decision-making. If they resist, position it as a way to save everyone time and effort by making sure they’re on the same page. Plus, it saves the owner the added burden of relaying information, and it gives other family members an opportunity to ask questions directly.
4. Family Secrets Could Become a Problem
Every family has secrets, and they are landmines for the advisor. Family members may confide in you or ask you to be the one to bring the secret into the open, such as during a family meeting. That’s not your place and, despite what anyone may say, you will be blamed for opening wounds, even when acting with the best intentions.
Tips for Advisors: Approach family secrets with extreme care. Respect the secret and the family’s need to keep the secret private, provided you’re not asked to violate any ethical or legal boundaries. For the family member who confides in you, make referrals to the appropriate resources, like mental health professionals or specialists in family dynamics.
5. The Family Factor Makes It One of a Kind
So far, we’ve talked about some of the unique features of family businesses that make advising more challenging. But there are a lot of benefits to working with a family business that you won’t find anywhere else. The biggest of these is family.
It’s hard to put your finger on it, but the family factor adds a special something to the business. Often there’s a keen focus on philanthropy and generosity: a genuine care and concern for their employees and their community.
Tips for Advisors: Take some time to enjoy the family vibe. It’s truly one of a kind! You should also recognize the family factor offers flexibility in planning, and there are other ways to preserve the family’s legacy than simply passing on the business.
6. It Feels Personal, in a Good Way
Family business is deeply personal. For all the talk of keeping family and business separate, rarely is it executed well. As a result, everything is done with passion. The family is more invested in the work, they’re more loyal to one another, and they’re more willing to set their wishes aside for the good of the business.
Tips for Advisor: Rather than deny the emotional aspect of the business, embrace it. Then help family members develop networks outside of the family business. This gives them a nonfamily outlet to vent when things get intense.
When it’s apparent a family member is struggling with a course of action, ask them to think about it as a family member versus a business owner. Even have them write down the different perceptions on paper or on a whiteboard. Helping them pull apart their overlapping roles in the business gives them perspective on where they’re struggling.
Is Family Advising Right For You?
Advising family businesses is a job unlike any other. You’ll have some unique challenges to work through (such as parental love and ego, pressure to pick a side, family secrets, and hidden players), but you’ll also experience a passionate and generous atmosphere you won’t find anywhere else.
If you find yourself struggling to work through the heavy emotions of the family business, you aren’t alone. I’ve experienced this first-hand when working with clients. It’s not fun, and it’s tempting to ignore the problems and let the family work it out on their own.
But as the advisor, you’re in a unique position to help the family. You’re an outsider. You’re able to be more objective and see the bigger picture.
Before you give up on a client or pass them off to a colleague, consider enrolling in my online course, “Is There an Elephant in Your Family Business?” In this 2-hour course, I’ll provide you with practical tools, strategies, and guidance you can use to start a productive conversation about problems within the family business. That way, your client can take the next step toward resolving the issue, and you can focus on doing what you do best.