Bullish on Books Blog

'Blood and Business Don't Mix' — A Family Business Survival Guide

George Cloutier, Author, Profits Aren’t Everything
"Profits Aren't Everything, They're the Only Thing" by George Cloutier

Some tough love from George Cloutier author of , "Profits Aren’t Everything, They’re the Only Thing."

But don't be scared off;  with all that tough love, some great advice for those of you running a family business - or for those who have longed dreamed of doing so.

Guest Author Blog: George Cloutier, Profits Aren’t Everything, They’re the Only Thing.

Of the 23 million small businesses in this country, 60-70% are family-owned.  That’s where most of their problems start—with the rest of the family. 

Our company, American Management Services, has worked with hundreds of troubled small- and mid-sized businesses. We don’t publicly present ourselves as a family counseling service, but a good deal of the time that’s exactly what we do. The problems that are rife in most family businesses are not just about profits and losses. They’re about all the raw emotions, the resentments and the betrayals between husbands, wives, sons, daughters, brothers, sisters, and in-laws.

The best family business has one member. Blood and business don’t mix. It’s a recipe for office dysfunction. In my experience with thousands of small businesses, I have found that putting relative in a role they are not suited for will lead to failure, and it’s done way too often.

Guest Author Blog

Of course there are exceptions.

There are ALWAYS exceptions, and you may well be one of them. But even if you’re running a family business that is doing okay, you know profits could be much better without the extra expense of keeping a child, sibling, or in-law on the payroll

George’s tips for family businesses include:

  1. Don’t restrict yourself to a pool of untalented relatives for key roles. Most problems in family businesses are caused by the incompetence of family members. Go outside the bloodline and do a real search for the most qualified job candidates.
  2. Cancel your kid’s membership in the ‘Lucky Sperm Club.’ Gifted members are rare. If you want to leave a legacy, don’t allow it to be a pile of unpaid debts.
  3. Forget “blood is thicker than water.” That kind of mentality will send you straight into a financial hole you may never climb out of. Believing that your relatives feel they have as much at stake in the business as you is a fallacy.
  4. Keep the family squabbles at home. Bringing messy domestic dramas into the office is atrocious business practice, yet family squabbles play out in front of staff all the time.
  5. Fire ‘em—they’ll get over it. Small business owners can lose everything over a misplaced sense of family loyalty. They have to be prepared to fire a relative. “My best solution for family members who don’t work out is to show them the door,” George says.
  6. Parole them with pay. If firing incompetent relatives simply isn’t an option—if you’re worried about how Junior is going to pay his bills—then pay them to stay away from the business. You’ll save money in the end.
  7. If you absolutely must continue working with a relative, NEVER treat them any differently from your other employees. Pay them the same and expect the same level of performance.


George Cloutier

George Cloutier is the author of Profits Aren’t Everything, They’re the Only Thing: No-Nonsense Rules from the Ultimate Contrarian and Small-Business Guru.

Cloutier has worked to improve 7,000 companies across 400 industries, so he knows how to fix what’s broken.

He has also partnered with the United States Conference of Mayors to provide expertise in small- and mid-sized business growth.

For more information, you can visit http://turnaroundace.com.

Do you have a book suggestion, Email me at bullishonbooks@cnbc.comAnd follow me on Twitter