Working with Family-Owned Businesses

The upside of this market includes:

• Clear decision making. The buyer is usually clear and accessible, because that person makes all the key decisions.
• Passion for the business. There are fewer turf battles because the business is the lifeblood of the family and often has been for two or more generations.
• No influence, politicking, or interference from boards, shareholders, or other peripheral groups.
• Bottom-line mentality. The family cares about what's in it for them.

The downside of this market includes:

• A surfeit of emotionalism and vanity. Rational decision making is not always the name of the game.
• Paucity of talent. It's not uncommon for key talent to have been blocked and have departed, and/or for the family members to be rather poor managers themselves. In many cases, the problem is the boss in these businesses.
• Penuriousness. That's a lovely way to say "cheap." Every penny spent or invested comes from the family coffers, and it ain't parted with easily.
• Veto powers. There are often several people who can veto a project or expenditure, and they don't always see eye-to-eye, meaning even valid and powerful projects can be derailed.

Nonetheless, many consultants make a fine living in this market, and others have dabbled and escaped with a profit. Here are some vital factors to consider when pursuing business with a family-owned enterprise:

1. Be absolutely rigorous in your payment terms. I always try to be paid completely in advance, in case I have to gently point out that the buyer is also the problem. Try to obtain at least 50% on acceptance, and create an ironclad agreement for the remainder of the payments. ~
2. There may be multiple buyers, even though you've met someone who can write a check. There is often a formal or informal committee which decides expenditures over even minimal amounts, and each member has to say "yes." In this case, establish a relationship with each one separately, not only with the group, so that you can understand what makes each one tick.
3. Don't assume organizational smarts, and consequently don't become inadvertently arrogant. You may find workplace practices far behind the times, or you may find employee benefits far over marketplace norms. Don't smack your forehead and yell, "Fools!" These organizations are often as eccentric and idiosyncratic as their ownership.
4. Be prepared for less responsiveness and even less honesty. In my experience, employees in family-owned businesses tend to be close-mouthed so as not to offend, and/or fiercely loyal and don't want to share the dirty linen. Normal surveys and interviews might not be nearly as valid as other venues.
5. Be light on your feet. In the midst of the project, something may change, a new priority may emerge, or attention may shift. If you feel the movement is unwarranted, be prepared to demonstrate the importance of your work to the family's self-interest. If the movement does seem justified, be prepared to jump aboard the train headed in the new direction.

Family-owned businesses are desperately in need of consulting help, and what could be more appropriate, since most consultants also own their businesses? The key is to understand the distinctions and use them as advantages, not fall into them as if they are traps.

My experience is that the best way to reach buyers in this marketplace is through referrals from other such enterprises (trust), appearances at trade shows, especially with the trade association's endorsement (credibility), and highly-targeted content offerings (relevance), e.g., "How to attract and retain key talent in closely held companies." These last offerings may be publications, articles on your web site, speech titles, and so forth.

The small business market is overwhelmingly family-owned businesses and is growing. It should be a major source of income for smart consultants in the years ahead.