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Dear David: Managing a business amidst sibling rivalry

July 3/10: Volume 32, Issue 2

By David Romano

 

Dear David:

Screen Shot 2017-03-06 at 10.37.51 AMMy father transferred our business to my three siblings and me quite some time ago. We didn’t pay for it and all have equal ownership. I now find myself doing more for the business than my siblings. When I ask them to work harder and play a larger role they throw our equal ownership in my face. I am now considering opening a separate flooring store without them. Do you have any suggestions before I make this decision and cause more conflict?

Dear Owner,

Starting a separate company may cause even more strife than your current situation. The thought of starting a new company may get your heart pumping and sound like a good solution, but when the adrenaline wears off and you are hit with your new reality it may be more than you can handle. If you are the one carrying the largest workload, you will most likely end up with two full-time jobs because completely exiting the family business could cause irreparable harm to your family.

If your father had structured the transfer differently you could have avoided this mess. Not assigning one of you controlling interest is the main issue and is a real impediment to an effective solution. Here are some recommendations:

  • Sit down with your dad and siblings and discuss what you’re feeling. Let them know just how bad it is and that you are considering opening your own flooring store without them. During the conversation ask for a renewed commitment from each sibling. They may not know what they are doing is having such a negative effect on you or the business.
  • If they do commit, define roles and responsibilities. A clear understanding of what is expected is important for everyone whether or not he or she is part of the family. This exercise may be enough to get them re-engaged. You need to define what each should be doing and what each task looks like when done right. Check on their progress in 90 days to ensure no momentum is lost.
  • Make adjustments to how everyone is paid so they are rewarded for their direct effort. Just because you are all equal owners doesn’t mean you all need to receive the same amount of pay. If you all sell, set up a plan where each gets a lower salary and then earns commission or bonus once their salary is covered. If anyone’s function is not sales related, research what his or her position would be paid if you were to hire someone else to do the job. If the position should be paid less, pay them less. If the position should be paid more, pay them more.
  • If all else fails get an objective evaluation of the business done to find out the value of each shareholders’ stake in the business. If some are not willing to pull their weight buy them out. If you do not have enough cash to pull this off, I suggest you look at getting some funding. If you cannot get the funding you may consider buying enough equity from them to gain controlling interest.

Best of luck in this venture, and if you one day find yourself in the same position as your father where you want to transfer the business to your children do not repeat the same mistake. Have them buy into the business, assign controlling interest and be involved in setting clear expectations.

 

David Romano is the founder of Romano Consulting Group and Benchmarkinc, a group that provides consulting, benchmarking, recruiting and software solutions to the flooring, home improvement and restoration industries.