The speaker says that the percentage of businesses that are family run is What does the speaker say about contracts for family

Many people at some stage in their lives consider setting up a business with their partner or other members of their family. The idea may seam very appealing, but the reality of working with someone close to you can often create unforeseen problems. I’d say, 80% of family run businesses think that when times get tough, love, romance or family bonds will see them through. But the fact is that although 70% of business are family run, only 40% of these companies survive into the second generation. Why, then, do so many family businesses fail? Well, money has traditionally been thought of as the root of all difficulties. But in my experience the major problem is much more basic. In businesses which don’t have family ties or relationships, people find it easier to communicate and to say what’s on their mind. In contrast, which family businesses, people often make the mistake of thinking that they know what views others family members have without actually discussing them. There is one strategy which should be employed in all family businesses to prevent future problems, as time goes by, one partner may lose interest or not work as effectively as they’re expected to. If each partner’s responsibilities are identified from the start so that they know exactly what is required of them, difficulties are less likely to arise as the business develops. I would also recommend asking yourselves a few "what if" questions before staring a family business, for example, what if one of the partners brought a friend into the business and the others didn’t like this person? What would you all do? To avoid this kind of situation, you should talk it over amongst yourselves. This sort of research can make you aware of both you own attitudes and the attitudes of the other members of the family before problems actually occur. Contracts are another potential problem area. Too many family businesses are run on the most informal of terms. People often think it an insult to ask a relative to sign a contract outlining the terms of a business venture. But you should treat the family business like any other business and get a professional to draw up a contract. Whether the business is profitable or not, it is supposed that the shares and who owns them must be clearly defined and written into a formal agreement. It must also be clear who is running the company. I know of a family business whose members took a vote on every decision. Perhaps this exercise in democracy should be applauded, but it created so many complications that in the end the business failed. Even a small committee can sometimes be too large. In matters affecting the entire company, only one of you should be the decision maker. He or she doesn’t have to be the largest shareholder, but should be the one best able to lead the business. Another type of problem arises when a relative decides to join an already established business. In these cases, you should do everything you can to avoid favouritism. When my son, Tony, completed his accounts course, he wanted to work in the family business, it was important to avoid putting him straight into any kind of managerial position. So he worked on the shop floor on the assembly line. He learned everything about his job within three months. At the end of six months, he knew more about manufacturing process than I did. But Tony learned not just about the company, but the people who made it work. The factory workers had respect for the fact that he understood them and the business. So after 12 months there was no problem when we then moved him into a junior executive position. Ask any family member who wants to join your company to walk a similar road. They will then always prove to be a valuable asset.