Growing up in a family business certainly teaches you things that you won’t learn in a classroom. You definitely learn a lot about business, managing family dynamics and the importance of customer 
service. The other thing you learn a lot about is risk and reward.
My father started a construction business in his thirties and by the time he sold it just before he turned seventy; most of our immediate family were involved in the business at one time or another. My mother managed the admin side of things, I helped out with the marketing, my brother occasionally worked on site, my grandfather managed the equipment and storeroom and my uncle was a project manager on the bigger jobs.
This is what being part of a family business taught me about risk and reward:
1. Give things a go and learn from failure
Besides building hospitals, schools and shopping centres; my father wasn’t scared to try new things. My long-suffering mothered got dragged into many of his entrepreneurial endeavours, which ranged from an innovative retaining wall system to a pie shop, ceramics and marble product manufacturing and an educational toy shop (and those are just the ones I can remember!). Some things worked really well, and others not so much. The key lesson I took from this was that it’s fine to take calculated risks and give things a go and to recognise that rewards come in all shapes and sizes – definitely financial, but sometimes it was the people you met when you opened yourself up to a new industry and way of doing things. As long as you learn from it, ‘failure’ isn’t the end of the world.
2. It’s not for everyone
While growing up in a family business is a wonderful education, it’s not necessarily every family member’s passion. In the early days when you’re just starting out, there’s the tendency to lean heavily on family members as there’s not enough money to pay a staff member. So, the cousin that’s good at IT becomes the IT department, and your spouse suddenly has to learn how to do bookkeeping and marketing as well as manage the compliance stuff like licenses and insurance. Many children will claim to be scarred for life because they were made to do the filing during school holidays (I still have nightmares!). The point is it can be challenging to blend family and business. It’s important not to assume everyone is as committed as you are and to acknowledge family members’ contribution. Also, don’t underestimate how steep the learning curve can be – learning a bookkeeping software system or the ins and outs of Instagram doesn’t happen overnight.
3. Shared interests
While you shouldn’t assume that everyone will love the business as much as you, there’s nothing quite like celebrating a big win with your closest family. One of the biggest rewards that come from being a family in business is the shared interests and passion. There’s always something to talk about and there’s a sense that you’re building a legacy that not only keeps the family fed, but is something for future generations.
4. There’s a lot more at risk
When you’re a family business, you have a lot on the line. All your eggs are in one basket, so if someone gets injured; your equipment gets stolen; there’s a lawsuit; or you face one of any number of disasters that can impact a business, the consequences can be so much worse. Our family business had its share of disasters, from break-ins and tools stolen, to work vehicle accidents, client’s not paying and my grandfather even managed to chop off the tops of 3 fingers.
Margo Goodall from Credence Insurance stresses that having proper insurance is mandatory for tradies. While most small businesses are aware of the need to protect themselves against large liability exposures and the need for statutory workers compensation insurance, Government Regulation is placing ever increasing demands on business and it is therefore important that you consider an ever increasing number of risk exposures.
According to Margo, employment practice errors and omissions have resulted in over 75,000 claims per annum being sent to Fair Work Australia. In the regulatory environment there are tighter regulations in the treatment of wages and definition of employees for the purposes of Workers Compensation as well as an increased focus from Workcover on completing wage declarations.
Margo also points to the increase in Cyber and Crime exposures. These are doubling year on year and Privacy Protection legislation continues to become more onerous as cyber crime escalates exposing business database information to the public.
When you consider that there are over 5000 statutory fines and penalties that companies, partnerships and sole traders may be subject to; you realise why it’s important not to just DIY your business insurance. You can land up paying for stuff you don’t need and being underinsured for what you do need.
Margo suggests you speak to an insurance broker that really understands your industry as they have a number of tools that can assess exposures specific to that industry and advise you on the type and level of cover you will need. When you use an insurance broker they are a professional adviser and it’s their job to advise clients correctly. If they fail to do that, and they leave gaps in your cover and don’t discuss it with you, then they are actually liable and have insurance that would cover that exposure. An insurance broker will also take the time to understand your business goals and where the business is heading. They will identify risks and how you might mitigate them, put money aside or transfer that risk to an insurance company.
One of the biggest risks with doing it yourself and buying the cheapest online policies from a range of different insurers is that these policies don’t always dovetail neatly, leaving gaps. An insurance broker will make sure there aren’t gaps in cover overall as well as having a detailed understanding of the wording of these contracts and any conditions or restrictions on cover. A broker is an expert in the fine print and is there to help you come up with risk management strategies as well as help you with any claims.
Some typical cover includes:
· Official Investigations and Inquiries Defence Costs
· Statutory Liability Defence Costs and cover for fines and penalties
· OH&S Defence Costs
· Crime – provides cover for direct financial loss caused by employees
· Tax Audit Costs – provides cover for costs resulting from a tax audit notice served on the insured
· Employment Practices Liability – provides cover for claims alleging an employment practice breach such as wrongful dismissal, discrimination and harassment
It is not uncommon for Sole Trader and Partnership business structures to engage a service company to undertake HR, Payroll and IT Services for the partnership’s business activities, and as such cover needs to be extended to the service company.
Lighthouse will be delivering a workshop series specifically aimed at tradie family businesses, covering topics such as managing risk, marketing, finances, compliance, troubleshooting and being a family in business. The workshop series starts on Wednesday the 27th of February and there are a limited number of fully sponsored places courtesy of Credence Insurance. To find out more visit https://www.eventbrite.com.au/e/the-tradie-family-business-tickets-53421479082
Candice Edye from Lighthouse Business Innovation Centre
Lighthouse has a strong track record of supporting entrepreneurs, researchers and inventers on the path from concept to commercialisation. Since July 2008, Lighthouse has worked with over 990 distinct enterprises and provided group and peer based services to over 3400 enterprises and individuals. For over five years Lighthouse has successfully delivered business advice, education, mentorship and networking opportunities to help these businesses commercialise their ideas and grow their companies. Lighthouse also delivers programs such as the ACT Microcredit Program for the ACT Government. Visit www.lighthouseinnovation.com.au for more information.
