When the Salon Is a Family Business

A certified Family Business Advisor and consultant, author Henry Hutcheson is all too familiar with the patterns that can lead to problems in family-owned businesses. And they’re almost always preventable. “If the business is professionalized, there will be a way to deal with those issues,” says Hutcheson, author of Dirty Little Secrets of Family Business. “But too often, safeguards are not in place.”

Hutcheson offers five success strategies for family businesses:

> Keep the lines of communication open. Schedule regular family meetings to discuss issues of concern and topics such as business transition, business performance, and responsibilities. Include all of the family members, no matter where in the hierarchy their jobs fall — exclusion creates animosity.

> Assign clear roles and responsibilities. As a family member, it’s natural to feel that everything is “my” business. However, not everything is every family member’s responsibility. Job definitions prevent everyone from jumping in to tackle the same problem and help ensure the business runs smoothly.

> Keep good financial data. The downfall of many small businesses and family businesses is not having solid data. Have a single point of contact to manage the finances. If you’re small enough, you can rely on a family member. Otherwise, you’ll need to bring in a qualified accountant.

> Avoid overpaying family members. Market-based compensation is fundamental and essential. Parents in family businesses tend to overpay the next generation, or pay everyone equally despite differing levels of responsibility. Both are bad practices. The longer unfair compensation practices continue, the messier it will be to clean up when it blows up.

> Don’t hire relatives if they’re unqualified. Competence is key. Family businesses are a conundrum: The family aspect generates unqualified love, while the business side cares about profits. Thus, family members will be hired to provide them with a job, even though they’re not qualified. The remedy is to get them trained, move them to a role that matches their skills, or have them leave.