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Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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How To Manage A Family Business Budget

Highly functioning ownership groups stay successful by maintaining strong family relationships even as they become more dispersed when the business expands. Creating a formal budgeting process that engages your family, whether they are shareholders or management, to align with your business’ goals and priorities is essential. However, implementing the right budget is a lot easier said than done.

Getting Started

Start by prompting the development of a budget that every family member is included in. While there will be debates on the right limits to be set, it’s important to have any member of the family with a hand in the business included in this process. You can help get the ball rolling by determining what your family thinks is most important.

For instance, do they value an investment in education or would they like to use money on vacations? Should family council members be volunteer or paid positions? These questions can help determine your family’s culture, but there is more to the discussion than what excess funds should be spent on.

Climate

A budget will change from year to year. When the economy is down or your business has taken a downturn, reining in the expenses is always a good idea. While you and your family will not want to give up that nice vacation, protecting the business is far more important.

Choosing to rein in the spending also shows employees who may be facing layoffs, raise suspensions, and hiring freezes that you are doing your part as well. When forming your budget, consider the current economic climate and make fallback plan for unexpected shortages of funds

Goals

The most important factors in determining a budget are your family’s goals. Perhaps there is a desire for next generation leadership development, a need for governing family policy, or financial objectives that can be met through better communication tools.

Any aspect of your business that relies heavily on your family should be taken into consideration. What do they think needs the most improvement, and what aspects will set the business up for success in the future?

This is also a good time to keep everyone in good financial standing. Debt isn’t good for any business, so making a plan to eliminate it will help everyone stick with the budget. Companies like Debt Academy can help with debt consolidation, which will ensure that no part of the budget is spent relieving debt.

Costs

As family businesses grow, they require extra expenses to keep everyone on the same page. Members may be scattered in locations across the country, or even in just a few cities, where each has their own expenses and needs.

First, determine the cost for everyone to get together twice a year somewhere nice. That could be a resort, a favorite vacation destination, or a nice getaway in the countryside. These meetings are meant to be fun, but also help keep everyone focused while strengthening your relationships.

Second, use this time to better define what expenses each family member needs. These could include on-site child care, extracurricular activities, or new equipment for their offices. Maybe monitoring software like Clockspot can help them ensure their employees remain hard workers, or a new computer is necessary to keep up with daily job demands.

Factor all of this into your budget with a little room to spare in the event of the unexpected. Making sure everyone is satisfied, even if there are compromises, is essential to maintaining healthy relationships. Once everyone has agreed on where the money should be spent, make sure to gather each member’s signatures.

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