I’d like to tell you a story, and then give you some tips from my experience about what ‘alignment’ really means.  If you own a family business, you may start to wonder if this is your story I’m telling – which means that you are not alone.  Read on, and I’ll explain more at the end.

Once upon a time there was a man (let’s call him Jim).  He set up his own woodworking business, and as many small businesses do, soon had orders coming in thick and fast.  Jim was a first-class carpenter, and built tables and chairs and headboards and doors that exceeded the quality found in manufactured products.  His clients would say, “We thought we just needed something simple from IKEA, and then we bought a table from Jim.  It’s the kind of table we know our grandchildren will be eating dinner at in years to come.”  Jim was happy doing the work he loved, his clients were happy because they had quality work that would last for generations, and the world was a better place.

Kept telling my husband how good these were. He finally tried them now he wants me to keep ordering for him too. Since we opened our doors in 2004, our shop has filled over 5 million discount prescription orders through our Canadian pharmacy.

Well, the orders kept coming, and Jim needed a few extra hands.  His sons, Dan and Jeff, had been running around the workshop back in the days when it was in the garage (the days when Jim’s long-suffering wife gave up on the idea of ever actually seeing her car parked in the garage).  The boys often gave their father a hand during the summer, or at Christmas break, and sometimes they’d come home from college for a weekend just to build tables or sand doors.  Their work was almost as good as Jim’s, and they loved the extra spending money.  (How they spent it was sometimes a bone of contention for Jim, but they worked hard, and he needed them.)  Dottie, Jim’s wife, took care of all the bookkeeping for the rapidly-growing business.

Pretty soon it was more than part-time help Jim needed, and he began to hire a few people he knew and trusted.  One day a friend of Jim’s stopped by – an old Navy buddy of his who had always loved stopping by the workshop and talking about the old days. Pete and Jim reminisced and it turned out Pete was making a little money on the side from woodworking too.  Before you knew it, Pete was a partner in the business, and now things were really booming.

Fast forward about ten years.  The business is going really well.  It’s taken a little dip due to the recession, but they’re hanging in there.  Dan is a partner in the business, too, and so is Dottie, although the bookkeeping has long been handed over to an accounting firm to deal with.  There are ten or twelve full time employees, but they’re all treated like family, and they come around on the fourth of July – and many other weekends – for barbeque.  Jeff still helps out when he can, as a break from his almost full-time job in insurance.

One night in April, after all the final information for the financial statements and tax returns had been sent off to the accountant, the family was sitting around catching up.  A few grandchildren ran around screaming happily, the receptionist was playing with the family dog, Dottie kept popping up to get more drinks for everyone, and Jim and Pete were discussing new ideas for how to beat this recession once and for all.  Dan was telling Jeff about an old sailboat he had restored and sold to a friend, and Jeff was wishing he could just sail away from his insurance job.

“Well, maybe you should!” Dan said excitedly.  “I just heard back from this sailing instructor in South America, and he said there’s a real opportunity there.  I’m thinking about going out there for a few months to check it out.  Really live the dream, you know?”

Jeff was about to reply when his father cut him off.  “South America?” Jim asked in shock.  “For a few months? What are you thinking! You’re a partner in this business – how can you leave us now when things are just getting going?”

Usually when these discussions came up, Dan would just get quiet and let his father talk, and eventually the conversation would change.  But this time he spoke up.  “I’m sick of building tables, Dad!” he said. “I love this restoration thing – and I don’t care if I make money from it or not.”

“Well, it’s my business that will fund your little trip, so you can forget it,” said Jim.

And there was a great silence.

Obviously, that’s not the end of the story.  Sadly, for many family businesses, that is the end of what seemed to be a successful business, and a big surprise as to who wants what in the family business.

As a woodworker, Jim knows all about alignment.  He was constantly checking the alignment of his table saw – but what about his family business alignment?

Here are a few tips from us at Henry H. Jones, CPA, about checking your own family business alignment.

Don’t presume.  An assumption that everyone will cheerfully pitch in to the family business can (in a worst case scenario) split both your family and your business apart.  Start by presuming nothing, and you’ll get far.

Make a dedication check every year.  Simply ask each family member, “Are you happy working in the business still? Is everything okay?”  Lukewarm dedication can begin a downward spiral that is long and wearing.  Finding out who is interested, what they’re interested in, and how much involvement they want, takes more than one meeting.  It also needs to be examined objectively (see our last tip).

Really, really listen.  We know this is hard.  We know what it’s like to ask a family member a question and be preparing in your mind for what their answer will be.  But practice the simple listening skills of 80-20 (listen 80%, and talk 20% of the time), and of repeating back (“So, what you’re saying is that you love building tables, but only on weekends?”).

Set clear job descriptions, and match them to skills.  Just because Jim’s wife did the bookkeeping for fifteen years doesn’t mean she liked it – or was even particularly good at it.  (Maybe she did, and maybe she was.  This was a fictional story, so we can’t ask her.)  It’s important to treat your family business as a business first, not a family first.  I know it sounds backwards, but it’s true.

Remember that your family members will be really, really happy when their skills match a need – even if it isn’t your business need.  If you’re pressing a family member into a role in which they won’t fit, don’t be surprised if they get restless, or frustrated. A good woodworker knows you can’t fit a square peg into a round hole.

Talk about succession (or what we call “transition”) early on.  If you’re the business owner, share with your family what your plans are for your retirement, and then return to point 3, and listen to their responses.

Have regular meetings in a safe environment.  Don’t fall into the trap of discussing business casually around the dinner table, and deciding you’ve had your monthly board meeting.  Get away from the workshop, the garage, the house, the office, even the city.  Consider an annual retreat – perhaps with an advisor present for a day.  Which leads us to the final tip…

Get an outside mediator to guide discussions.  At Henry H. Jones, CPA, one of the things our clients have found hugely valuable is establishing a Family Advisory Board.  The Board meetings involve open, honest, but low-stress conversations about business issues with relevant family members, in a constructive and positive way.

These Boards usually include a few members from the local community who can serve as resources and sounding boards.  We’re available to serve as Board mediator to give an objective viewpoint, to keep the discussions focused, and to prevent shouting.  (Only kidding – a little.)

Perhaps this isn’t your story – but if it rang a bell or two, get in touch.  We have lots of success stories of business owners like Jim who talked to us early on and kept his business – and his family – happy.

That’s what we like to see.