Making Family Businesses Work

Concrete contractors who own their own businesses often find themselves working with family members. Although knowing each other well can be beneficial on the job, problems can occur when personal agendas carry over into the business setting.

Key issues to consider

Family business consultant Laura Michaud of The Michaud Group says four main issues must be addressed for relatives to run a business effectively. The first is estate planning, which is crucial because if it is not done properly, much or all of the wealth accumulated by a family business can be lost to estate taxes. "If the senior owner dies, that could kill the company because the government will take too much money," she says.

Business owners must also make financial plans for their retirement. "The senior owners are used to living a certain lifestyle based on their earnings from the company," she says. "In many family businesses, what you have, which is bad, is the 85-year-old owner taking a large salary even though they may not be contributing to the running of the business." This raises a company's fixed expenses and drains it financially.

Plans must also be made to determine who will run the company once the current owners leave. Michaud says succession planning for family businesses is difficult when the owner's children are uninterested in taking over or lack the skills to do so. For the business to continue will require either training the children in running the company or devising a different exit strategy in which outsiders are involved.

The most important issue confronting family owned businesses is communication. "In a normal business, if you have personality conflicts with someone, you can fire them," Michaud notes. "In a family business, that's not always the case. In addition, if you have a conflict at home that is brought into the business, it's dangerous. So it's extremely important in a family business to have good communication." Communication issues are the ones Michaud is most frequently called on to solve, although that is typically not the problem family businesspeople believe they have. She said conflict management is the hardest thing for people to deal with, especially with family members, because emotions can run wild.

The company is a business

Michaud's top recommendation for keeping personal agendas from interfering with business operations is to separate business and family by treating the business like a business.

"Conduct family business meetings with appropriate family members attending, with a formal agenda to discuss matters as they relate to the business," she stresses. "This is one of the most important things to do to maintain professionalism and keep the family in harmony. What happens is the family has certain dynamics, so many times they need someone to show them and teach them how to run these meetings." Without good meeting management skills, the meeting will fail.

She also recommends setting up an independent professional advisory board or board of directors. Each board member must have no conflict of interest or other business involvement with the company, which would disqualify the company's attorney and accountant. These people will become professional advisers who will help the owners make business decisions.

Treat family like everyone else

Ruttura & Sons has been in business since 1918 when Dominic Ruttura began doing concrete sidewalks and curbs. Son Salvatore expanded the business into residential foundations with limited commercial and industrial work. But when his son Tommy, the current president, took over in 1971, big changes occurred. His dad had only operated the business during warm weather, and Tommy decided he wanted the more stable income a year-round operation doing large commercial jobs would bring.

"As we grew up, we were in a real family business," Tommy explains. "My mom was the bookkeeper. My dad was not a boss; he was a working man. Everything in the family ran through the business. We don't do it that way now. When I bought my father out in 1971, I drew a line in the sand. I wouldn't let my mom do the books. I didn't want it to be run like a family business.