Step 1: Create a Family Business Plan

Updated: May 15, 2021

The first step we took when starting our first family owned business in Central Florida, was discussing a "Family Business Plan". This is NOT the business plan business plan you will need to apply for a loan.

This is an internal discussion to be had with the family members that are starting the business with you. In our case, this was the most important series of conversations we had. In order to prepare for it, I watched Eric Flamholtz's Online Course on .

In this article, I will share the notes I took while "attending" his class. These were the same notes I used when I implemented his teachings to our family business.

Creating a Family Business Plan

Note: This is not a Strategy Plan. This is an internal agreement.

I. There are two (2) types of family business issues:

1. Strategic Family Issues

a. Views on Purpose (for example: is the business meant to be a safety net for all family members to be employed or is the intention to sell it and make profit from it?)

2. Family Dynamic Issues

a. Who's in charge in the business versus who's in charge in personal life.

b. What are the rules for the non family members?

II. Tools to help prepare for (and hopefully solve) these common family business issues.

1. Values

a. How the family proposes to behave towards its own members and non members.

b. Solves Family Dynamic Issues

c. Setting these values is critical.

2. Mission

a. Establish the purpose of the business.

1. Example: "The purpose of our business is to provide employment for our family members".

b. The mission resolves the strategic issues.

3. Vision

a. Establish what the family wants to achieve with the business in the future (Example: Sell, expand, etc).

When a family agrees on all three of these aspects, you increase your chances of success.

Now that you know what you're doing, let's sit down and create your own Family Business Plan. Remember, this document is meant to be for your family only. Employees and outsiders are not going to be reading it. The idea is to have a real and open discussion with the family members that you are going into business with. The goal is to make sure you are all on the same page and avoid as many misunderstandings as possible in the future.

First, conduct a family SWOT Analysis.

Ask each member to determine their Strengths, Weaknesses, Opportunities and Threats in regards to:

  1. Treatment of Family Members

  2. Treatment of Non Family Members

  3. Expectations of performance and accountability for family and non family members.

  4. Rewards and Recognition for family and non family members.

  5. Openness to Innovation and Change

  6. Leadership Roles

This is important because it will help you figure out who is best suited for specific roles. You will also be able to anticipate some problematic traits that may exist in your family and think of ways to prepare to face challenges in the future.

Try to keep this a judgement free zone. The objective is to get a true and honest picture of the people that are starting this business. Taking into consideration their positive and negative characteristics will help you address issues in a more informed manner.

Second, establish the family values.

These values (norms) detail the expected behavior towards family and non family members of the business. Ask each family member to explain in writing the values they would like to see implemented in each of the 6 key areas listed below.

I. Family Values

a. Norms that indicate how people ought to behave.

b. Define strategies to enforce the norms that you establish for each family and non family member.

c. 6 Key areas where these values MUST be defined (they comprise the "family business culture")

  1. Treatment of Family Members

  2. Treatment of Non Family Members

  3. Expectations of performance and accountability for family and non family members.

  4. Rewards and Recognition for family and non family members.

  5. Openness to Innovation and Change

  6. Leadership Roles

i. Leadership roles may differ in the family and in the business. For example, If a father and son go into business together and it is decided that the son will be the head of the company. They both need to understand that even though the dad is probably the "leader" at home, the son is the "leader" in the office.

Once everyone has their proposed values written down, discuss them together in a family meeting. Together, decide what values are important to everyone and how you propose to uphold those values in the future if issues come up.

Third Step: Define the Mission

The purpose of the business according to the family members involved. Remember, this is the reason you are starting this business. Is it intended to be a safety net to secure family employment, is it something that is meant to be carried through generations or is it something that is meant to be grown enough to sell and walk away with some profit?

Mr. Flamholtz suggest you do this by:

Asking each family member to write in their own words how they want to USE and OPERATE the business. Then have a family meeting in which these answers are discussed. Finally, decide on a mission together.

Final Step: Define the Vision of this family business.

Where do you hope this business goes? That is the "end goal"? What do you want your business to achieve or provide FOR the family?

Set a timeline for this vision (5 years is a good start). You can always re-evaluate this vision, but having a long term goal helps you and your family make decisions because when you have several options to chose from, you can pick that option that benefits your vision the most.

This process took some time. Each meeting is exhausting mentally, physically and emotionally. The subjects discussed can be sensitive issues for some members. Remember, you are building a team. This team needs to be able to communicate and come together in unison in order to push towards a common goal. This series of exercises and meetings will give you all a good look into how business meetings in the future may look. This will also give you insight on the type of people you are partnering with. Hopefully this insight will help you understand each other better and improve your ability to work as a team.

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