Many real estate agencies are classic ‘family businesses’ with more than one family member working within them. John Knight looks at the challenges and the opportunities unique to family business.
Growing up in a family business, I never knew any different than the sound of the fax machine early in the morning and Dad being on call 24/7. Although I became the disappointing son who did not want to be an electrician and take over the business, these experiences as I was growing up gave me an insight into family business that I often lean on.
As if work was not hard enough already, being a family business adds another layer of complexity that needs to be constantly monitored and managed – especially in the high-performance environment of real estate. I have seen many family-run real estate businesses achieve enormous success, but I have also seen many never reach their potential because of ‘family’ issues.
The top three barriers I see to success in family-run real estate businesses are:
THE MEDDLING MUM AND DAD
I have seen it time and time again: the senior family member, usually the mum or dad, keep saying they want their kids to take control but simply do not truly let go. Often the next generation are ready but constantly feel like their efforts are over-ruled and they start to question why they bother. Suddenly, concerns arise that ‘Mum and Dad will never let go – why am I wasting my time here?’
The senior family members keep saying they want their kids to take control but simply do not truly let go.
THE GUNG-HO GRANDSON
There is a common statistic that 90 per cent of a family’s wealth is lost by the third generation. Maybe it is the different relationship between the founders and the grandchildren that makes them oblivious to what is going on, or maybe they just have such a strong desire to keep the business going that they leave it in the wrong hands.
Personally, I believe it is more about hardship – the third generation are so far away from the tough days they don’t have the fear of failure. Great family real estate businesses are constantly telling stories of tougher days to ensure the following generations don’t forget how hard it can be when those sales don’t come easy.
Family businesses are different and there is nothing surer than sibling rivalry rearing its ugly head when brothers and sisters end up working together. I have been in a boardroom with multiple generations to discuss succession strategies only to hear something along the lines of ‘Johnny always gets what he wants’. In real estate, this is often amplified when one family member sells and can easily show the value they provide, compared to another looking after the back office and often under-appreciated.
FROM SURVIVING TO THRIVING
If you want your family real estate business to shift from surviving to thriving, here are my top tips:
- As the family leader, change your role by letting go of a key function in the business. Maybe it’s managing the accounts, presenting the awards or dealing with recruitment, but it needs to be something visible to the team and the market.
- Give every family member clarity on their role, from sales to PM and back office or marketing. Clarity, not charity, is required so everyone has a sense of purpose.
- Reward the role, not the individual. Asking someone to sell but paying a flat salary usually ends in the person feeling ripped off unless there is some other type of variable reward.
- Document your succession and exit plan. Show the family how they will get equity in the future, whether by gift or acquisition.
- Manage performance of family members the same way you do others in the business. Feedback is even more important to ensure trust and competency exist both ways.
- Sit down and document your family business vision and mission – no different to any other business.
- Invest in the EQ and IQ of the family group. A little self-awareness goes a long way to making sure the team works well together.
- Invest in a family charter – it’s like a shareholders’ agreement or constitution for the family and includes rules like not taking work issues home.
- Estate planning should never be an afterthought; it is even more complex when only some of the family work in the business.
- Some family members just shouldn’t be in business together. Talk about the elephant in the room.
The most successful businesses are those that have multiple individuals with a vested interest in its success. This, combined with the passion and emotional connection, can make family real estate businesses a real force to be reckoned with.