1. (Byrd & Megginson chapter 2) BY:SITI AISHAH OTHMAN 2010589793
FAMILY BUSINESS
(Byrd & Megginson chapter 2)
BY:SITI AISHAH OTHMAN

2. Role of the family-owned business
Family businesses are good, but they can also be a source of unresolved
family tensions and conflicts, which can create obstacles to achieve even the
most basic business goal.
When close relatives work together, emotions often interfere with business decisions. Beside that, unique problems, such as the departure of the founder-owner, develop in family firms. When more than one family member is involved, emotions and differing value systems can cause conflicts between members.
In fact, most people related challenges faced by family businesses small or large. And then result from the interactions of business necessity with family value and relationship
Family run businesses get a bad rap that is totally underserved. A family member may receive a lot of bad publicity for various reasons, and the public tend to attach a negative feeling toward the family name attached to the small business.

3. The family and the Business(cont)
As business occurs we tend to get caught up in business activities and delay to our families while concentrating on the financial needs. Family discussions also help parents stay in touch with each other and not lose sight of family values. We usually think of family businesses as being started, owned, and operated by the parents, with children helping out and later taking over, but now two contrary trends are developing such as:
First trend- many young people are going into business for themselves and tapping their parents for funds to fianance their ventures. In return, children often give one or both parents an executive position in the company including a seat on company or after retirees parents can work par time for their chlidren businesses without assuming a lot fo responsibility.

4. Second trend- doing business together spouse
Second trend- doing business together spouse. Businesses are equally owned by both men and women. Some tips on how to get along with your spouse while running a joint business.
Making it in business with your spouse:
don’t be blinded by romance and follow all the rules
Define each person role and accentuate each other talents
Agree to disagree set the ground rules
Be clear and specific about your expectations of each other
Don’t ignore business conflicts in an attempt to spare a personal relationship
Set aside family time and stick to it
Set up a system for recognizing and rewarding hard work done by family members.
The founder-owner may set any one or more of a variety of goals, such as adequate income and perpetuation of the business. This variety of goals exists in all companies, but in family firms strong family ties can improve the chances of consensus and support, while dissension can lead to disagreement and/or disruption of activities.

5. Daughter who are interested in leading the family busine should:
Experess interest
Gain experience outside of the family business
Learn from the senior generation
Be sensitive to the parent
Get involved and ask questions
Meet with women who lead family businesses
Define yourself
Develop a company vision

6. Family interaction
The founder or a close decendant is the head of a small business. Family members “sense of “ownership” can be a strong, positive motivator in building the business and leading to greater cooperation. however, conflicts can occur because various relatives look at the business from different perspective.
How to deal with Incompetent Family members?
Related problem can be the inability of family members to make objective decisions about one another’s skills and abilities. Some members want to became the head of the business but do not have the talents or training needed. Others may have the talents, but because of their young or inexperience, these talents may not be recognized by other family members.
How to Compensate Family members?
Compensating family members and dividing profits among them can also be difficult because some of them feel the contribute more to the success of the firm than others. Compensation should be based on job performance not family position.

7. Family Limitations(cont)
The number of competent family members from whom to choose the managers of the company is usually limited. Some members do not join or not capable of joining the company in any position, some are capable of filling only lower level jobs, and some are not willing to take the time expend the effort to prepare themselves for a management position.
Some families organize their business into corporation and hire professional managers to run them when no family members are in a position to manage or no agreement can be reached on who shoul
d run the company.
Advantages for family limitations using professional management, freeing family time for other purpose, reducing friction and having employees treated more fairly.
Disadvantages of this agreement, however may be reduced family employment, lower income, concentration of power in small cliques, difficulties in finding and keeping a good management team and loss of the “personal touch”.

8. Culture and the Family Business
Preplanning can really help. Written ownership agreements at the time the the business opens, such as buy or sell, used in corporations. Pre or post-nuptial agreements are also good. Single individuals may decide to transfer ownership into a self-settled trust. This also works as a safety net for unmarried childern.
Culture and the Family Business
There is also a cultural-based growth in family businesses. The mormon culture encouraged women to stay at home and care for their children. In our “family-friend” business environment, many businesses are cutting back on flextime, job sharing, and paid family leave in order to continue to be profitable.
There are many home-based businesses for stay at home. For example, Avon, Tupperwave and lingerie to name a few. Now increase in the number of people who works out of their homes.

9. Family Resources
The amount of capital available within the family may limit expansion. While family resources and contacts may be adequate for a small business, as the company grows, the borrowing power is limited by the amount of family assets. Then, family members may disagree about such issue as the following:
Should money be obtained by borrowing
Issuing stock
Selling assets
Financial techniques.
Should planning be for the short or long run
Because of the diversity opinion, even the choice of a consultant can be controversial.

10. Preparing the next Generation(contr)
Start at part Time or Full time jobs?
One way to prepare children to take over the family business is to let them work on simple jobs, or on a part time basis, which provides insights that may influence them into or away from the company. The experience often encourages them to finish their education to be better prepared when it’s their turn to run the business.
Another form of preparation is working for another company to broaden their training and background. Such experience helps justify moving a family member into the family business at a higher level
Start at Entry- Level or Higher Level Positions?
Should a family member start in an entry level job to learn the business from the ground up? There is some disagreement on this point, but none about the need for knowing the business, regardless of how its done.

11. The following are some techniques that should work for you:
Never allow a child to work in senior management until he or she has worked for someone else for at least two years
Rotate the person in varying positions within your business
Give promotions only as they are earned.
Devote at least half an hour each day to face to face teaching and training.
Do not take business matter home.
If the newcomer is ready to learn the business, true responsibility must be given. Otherwise,the person cannot learn to manage the business.

12. Why Succession Is a Problem
Preparing for Management Succession
Any business must anticipate changes in its top management. It is not enough just to select a person to step into the job when it becomes vacant. That key job requires much training and experience because the decisions the person makes can vitally affect the company and its future.
Why Succession Is a Problem
Many small business owners have concerns about passing the business on to their children. They next generation not only needs the ability to operate the business but also needs the education, certifications, talent and desire to carry on the service.

13. An Overlooked Problem
The development of managerial personnel and the provision for management succession are greatly neglected, often until it is too late to do anything

14. Plan Ahead Management succession occurs when the family leaders Dies
Becomes incapacitated
Leaves the company (volunteer or otherwise)
Retires
To avoid family succession problems, enterprenueurs should start planning early for their repalacemant
In plan ahead can be divided for some categories:
Sudden & Planned Departure
Selling to Family members and outsiders
Making the transition Easier.

15. Sudden and Planned Departure
Sudden Departure
A successful business must continue to operate even when the owner manager leaves, for whatever reason. Plans can easily be made for vacations because they are of short duration, they require a limited number of decision, and the vacationer is available if needed.
Planned Departure
-when owners plan to leave or retire, they have a number of options. If the company is a corporation, there will probably be less controversy, because the replacement top officer should be known by the time the owner departs, and the transition should go smoothly.

16. Selling to Family Members and Outsiders
If the transition is to be complete, the business should be sold to the offspring so that full responsibility is handed over to them. The advantages of this type of change for the original owner are as follows:
The business stays in the family
It provides a source of employment for family members
The family stature is maintained
The former owner is free to relax or travel
There is pleasure when the successor is successful
It can strengthen family bonds rather than produce additional family friction

17. Selling to Family Members and Outsider (contr)
Selling to Outsider
-if no relative will assume responsibilty for the running of the business, the owner can sell out to a partner or an outsider, or can even close the business. There are many advantages to turning the reins over to an outsider
Among these are assured income
Lack of worry about what subsequently happens
Possible opportunity to consult.
Release of family tension
Relief from further responsibility.
- Selling to someone outside the family can mean loss of family identification and resulting sadness, since it marks the end of years of effort and the loss of something the founder built. Selling to outsiders can have a beneficial effect on family relationship.

18. Making the Transition Easier
to make transitions easier for themselves, owners need to broaden their focus. Owner should begin to devote more time to hobbies and outside group activities, which should help them develop a sense of worth apart from the business.
Finally, the transition can be made in phases, by gradually turning part of the business over to the successor (s).
In making transition easier must have plan as follows:
Tax and Estate Planning