Family Owned Since...

Originally published more than 9 years ago. Thank you web.archive.org!

Wow! A penalty system! What was I thinking? Now (2015) I would replace that bit with a reward system instead and drop the profit sharing modification thing.

It’s almost inescapable right?

I’ve been thinking a lot about marketing lately. MoW needs to expand so I’ve been putting a strategy together to target a bigger market.

One of the things that got my attention is the abundant use of the phrase “Family Owned Since (insert year)”. Small business owners use it as, what seems to them, a great marketing tool. Maybe it is. But why?

Let’s address the “Family owned” part.

Why is it a good thing that a business is family owned?

Doesn’t that imply nepotism by default?

From my experiences, here’s how, not in all cases, but in most, families operate:

  • The head of the family usually favors someone over another. This automatically implies disgruntled employees.
  • The level of comfort between the employees (family) is usually high. So mistakes and screw ups aren’t taken as seriously as they should.
  • A screening process (interviewing) of the first few, most critical, employees is virtually non-existent. Now, let’s address the “Since ” part.

If you’re family owned and been in business for x years (usually 10 years or so), then why are you still family owned and haven’t expanded into a bigger entity?

The answer to that must be demand. After all, demand is what drives expansion. Great service and competence are what drive demand. Which is the family lacking?

I’m not trying to downplay the benefits of establishing a business with family members. My business is family-run, but I don’t intend on having it that way for long. There are several reasons for that. Three of them are the ones I mentioned above. To compensate for those factors, controls are put in place that set us on a straight path.

One of the controls we’ve put in place is a penalty system that penalizes anyone who strays from our core values. The short version of the system: Anytime someone messes with our core values or breaks a company’s policy, they lose 0.1% of their share. If they fixed the problem, they get 0.05% back. The percentages lost by one member are divided equally among the rest.

The system has it’s problems too, but mostly, it is the energy spent on implementing such controls. In addition to policies, which non-family members follow to keep their jobs, you’d have to come up with mechanisms that keep family-members on track.

Two points I’m trying to get through:

  1. The net gain of starting a family owned business as opposed to a non-family owned one might be very close to 0. You’d have to have a lot of dexterity and your relatives will have to have great faith in your leadership skills and ideas to pull off a positive net gain.
  2. Without core values, you don’t have much chance of succeeding. If you’re doing it only for the money, then good luck.
    This last point is very important. Jim Collins has done a tremendous amount of research about this subject and just by figuring out your core values, you’ve achieved a lot.

We at Motors On Wheels are always in the process of enhancing and maturing our core values. We know two of them for sure, but we’re always trying to discover the rest.

  1. Complete transparency with our customers: To us, it makes a lot more business and ethical sense to be completely honest with our customers. This amounts to more referrals and faster sales.
  2. Indestructible drive to succeed: Every business’ #1 goal is about making money. We have two spots for #1. A, making money, a lot of it. And b, spreading our philosophy of transparency as far as possible.
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About Nash Kabbara
Houston, TX
I work at Manna Systems where we solve business problems with software. Business, software, and stepping outside my comfort zone make about 80% of my life. The other 20% is highly confidential!