Institute For Family Business

      Kent Lutz- Advisors To Families In Business

                          Family Code of Conduct


Hold Family Meetings


Keep confidential all discussions about family behavior


Never undermine another family member in front of others


Talk directly, one on one, with all family members-including those whom you are not directly involved. Develop as many authentic one to one relationships with other family members as you can


Listen as well as talk. Listen to understand. Respect alternate viewpoints. Don’t interrupt


Don’t agree to a position you have reservation about without voicing your reservations


Ask questions about what others feel and think. Don’t interpret their viewpoint for them or assume that you already understand


Work hard to find constructive ways to address conflict


Stick to the issue


Pay attention to your own role in perpetuating a problem


Don’t wait for the other guy to change first


Give positive feedback


Focus on goals rather than personalities


Avoid laying blame or making personal attacks


Be explicit in your communication goals. If you want to have a real conversation instead of an argument, then say so


Be aware of your own resistance to “letting go” of control over others and be aware of how you hold on


Agree that its OK to express feelings; they may be real valid signals of issues


Develop and encourage a differentiated perspective. Try to differentiate between feeling and thinking. Be able to recognize, honor, and express feelings when appropriate, but try to recognize the difference between emotion and rational thought


View family harmony as part of the family’s overall mission in business together


Cultivate friends and interests outside the family to lend perspective to your family dealings. Cultivate friends that are not business related for good mental health


Begin appropriate statements with “I” not “You” This encourages a constructive focus on one’s own experience rather than criticizing or blaming others


Referring to the business, begin statements with “We” and not “I”. A reflection that we are all in the same boat and should be rowing together to a common goal


Before losing your temper ask yourself, “How would other family members feel about this issue?”


Discuss family problems when you feel calm, not agitated or angry


Discuss family problems early, as stewing on them is unproductive and leads nowhere


Don’t carry messages for others. Encourage them to speak directly top each other


Don’t expect the business setting to offer emotional support. It is there as a bonus


Respect each others space, individual differences, choice or spouses and other personal decisions


Make the development of Communication Skills a life long pursuit. Examples could be family meetings with speakers, outside advising, business forums, seminars, etc.


Build strong family relationships with in-laws as they are in important part of the team



Kent Lutz

President/ Founder

Institute for Family Business



The ideas presented above represent Family Codes of Conduct from a number of different families. They are listed as merely suggestions for one to consider. There very well may be many others a family wants to consider.

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                     Institute for Family Business

                                   Kent Lutz



       The Family Council-A High Return Investment


  1. Helps achieve balance between family and business
  2. Requires investing effort and resources in the organization of the family
  3. A forum with formal rules and procedures for successful governance of the family business
  4. Educates family members in their rights, responsibilities, and privileges vis-à-vis the business
  5. Provides a forum for discussing continuity and succession
  6. Helps elaborate policies for the family in resolving conflict over hiring and firing of relatives
  7. Helps with preserving and carrying on the family legacy and instilling in the next generation  a sense of stewardship
  8. Helps to articulate the family’s core values and communicates those values to the managers and BOD of the business-examples might be ethical or religious principals; social and environmental impact of company activities; are women being offered more opportunity
  9. Helps define who participates in value laden decisions
  10. Helps to pull apart business issues from family issues-family issues need to be discussed through a family council which must be communicated to the Board
  11. Helps to facilitate communications otherwise thought to be relaxed and spontaneous
  12. Helps to resolve a fair and orderly manner complex issues that cannot be accomplished in an informal setting
  13. Can help to be a stabilizing force in the process of succession
  14. Helps to smooth out generational clashes that might occur during transition or as a result of market conditions
  15. Responsible for defining the family’s involvement with the business and preparing family members to operate within the governance system of the company
  16. The council must send clear signals to the Board about the mix of family and non family leadership it wishes to see manage the company
  17. If the council decides it wants management to remain in family hands, it must direct the Board to develop a pool of talent who are qualified. If no family member is a candidate for the top job, the council must instruct the Board to seek outside professional management help or a team of family and non family leaders could be developed to lead the company
  18. The council needs to design the structure that will regulate the family’s involvement with the governance of the enterprise and the training that family members must get to operate successfully
  19. The very existence of  a family council is a signal that family matters have a top priority and will be attended to in an organized manner
  20. The family council helps to satisfy shareholders, who in turn become more committed to the business, which will help the business capitalize on the advantages of being a family business which include: focusing on a long term investment perspective; a willingness to stick together; a commitment to quality; and a culture that fosters loyalty and employee commitment
Emails for Small Business with Constant Contact

                      Sample Family Mission Statement

                          Family Mission Statement


We are fortunate to have a privately owned business in our family. The business provides family members opportunities that are difficult to replicate: opportunities to earn financial independence; to learn the skills of business and leadership; to contribute actively to others in the community, and to share common family interests and values. To work productively is to grow, to respect humility, to know the realities of life. Not to work is an unhealthy state. Maintaining the business in the family and seeking to expand and strengthen the business will help assure that our family will have productive work rather than live off the accomplishments of past generations. We are committed to the long term success of our family business for the benefit of our future generations.


The business must be rum as a business. In that way family members will know that they have earned their personal success; those that work for us will know that their careers and

families will be secure. We will provide an estate apart from the business to assure some comfort and security for each family member.


All family members are welcome in the business if the business can support all family members. We hope one or more family members will qualify to be able future leaders of the business. Our business will require excellent skills and excellent educational backgrounds.


To help ensure that family acts as one and works hard to formulate common plans and ideals, a voting trust will be established. The trust will represent the family shareholders and three family members will be elected as Trustees.


Business decisions will be aided by a Board of Directors comprised of the three family member Trustees and four others who are neither family members or employees. If we run ourselves as a business we should be able to convince the outside directors of the rightness of our business plans and goals.


Any family member may suggest any agenda item to be discussed at Family Council meetings. A Family Council shall be formed to provide an open forum for communications for the family. The Family Council will develop and implement the Family Charter defined as the policies and procedures for operating the family business


       Elements of Evaluating a Idea-Does it Have Legs?


  1. Compelling Unserved or Underserved Need-lack of something required, desired, or useful. Important to have flow of information to determine if idea already exists. Does idea alleviate pain, aggravation, or irritation. Would customer leap at the idea and Why? Why is idea compelling? Why do you think it’s compelling? How many buyers will feel compelled to buy your idea? If idea is scarce what premium would buyers be willing to pay? What savings could your idea provide to customers? Is there an adequate substitute? Why would customers crawl over broken glass to buy your product? Is it a matter of building awareness? A compelling unserved need is about the only thing that leads to a sustainable enterprise. Examples-Cure for Diseases, Faster switching equipment for Telecommunications, shoes, brakes, tires, engines that do not wear out, means for determining a nuclear threat, Techniques to fuse or repair torn spinal column-ie Christopher Reeve.
  2. Explainable Uniqueness-One of a kind, profoundly different than any other-in what way and can it be easily understood? Unique features and benefits-be careful of market sharks who steal ideas. Examples-Drug that enhances brain power and memory, means to reuse all frequencies used over the airways today without interfering with existing use, ownership of the only 2 acre plot of land over a long causeway spanning the ocean.
  3. Sustainable Differentiation-uniqueness is important but can you sustain it face of vigorous competition? Management team is critical, patents, copyrights, partnering with deep pocket resource, continued research, legislation, litigation
  4. Demonstrable Now-can the customer touch it, feel it, taste it, sense it, use it now? Are there easy substitutes for your idea? How quickly can customers understand value in your idea.
  5. Good Competition-helps to validate that your idea may serve the need even better; competitors do leach off the market share, disrupt marketing ideas, have expertise, but also provide you with a solid base for comparing what you offer versus them.Example-Taxi service where the price may be right but oversight of vehicle safety and cleanliness is lacking. It could also give you information that if a good competitor cannot do well with the business, it may not be an opportunity to pursue.
  6. Bad Competition-one with robust resources, solid talent, excellent product, adoring clients and simply an enterprise that might devour your clients and it would be difficult running a business against them. The implications of a strong competitor can be profound-customer base may be in doubt, vendors unreliable, cost of capital higher, distribution may be spotty, best advisors may be on their payroll. Examples-local supermarket in the neighborhood you want to open a butcher shop, MSFT when you are considering starting a new operating system
  7. Compelling Pricing Possible-cost savings in some way to your customers with comparable quality; can you win market share by offering at an introductory price?
  8. Closeable Customers-do you know your customer; do you know how many exist; can you articulate your vision to your customer; can you close the sale? Customers must buy your you product in sufficient quantity and at high enough price to cover all costs, fixed and marginal. Can you close a sale before your company actually exists? Example-fleet contract with police department to wash their cars while you are building the car wash 
  9. Quality of Evidence of Demand-strength of your belief; is there demand that you can verify; is it a hunch; why do you believe anyone would buy your product? Examples-email inquiries; written expressions of interest.
  10. Ahead of the Market-will your product arrive in market at just the right moment; can you lead the market; how fast are things changing; what direction is it going; is it changing strength? Population bubble; technology advances; greater efficiencies being created? Are needs and tastes changing; external factors-taxes; can you deliver quicker and more effectively; define target market and create innovation; Example-Wheelchair mfg as baby boomers reach retirement; bus service to soon opening casino
  11. Ambush Exposure-invisible competitor with lots of resources plunges into your market and steals customers; who would suffer most from your success; whose business would you harm
  12. Hot Market-a compelling idea unserved and rising to a rarely seen level; don’t assume to know more about your customers needs than they do-that leads to failure; fads can dangerous but profitable in the short run; watch for purchasing trends
  13. Attitude of Confidence and Fearlessness-be brutally honest with yourself; people must be right; be realistic and candid; attitude is everything; life is 10% what happens to me and 90 % how I react to it.; confidence and positive state of mind bring with self fulfilling power; Examples of abundance of confidence and fearlessness-John Glenn Neil Armstrong; Ted Turner; Amelia Erhardt
  14. Commitment-devote time, energy, and resources to the opportunity; make a dedicated commitment to task
  15. Staying Power-entails being creative if you run out of cash; you may need another source of cash flow to sustain the activity; don’t let investors take too much equity if it’s not justified; use consulting to get you through lean times while pursuing your idea; second source of income
  16. Passion-creates belief and encourages others to your cause; how do you conduct yourself when telling your story of your business; how enthusiastic do you become, do you think about it all the time, do you come up with creative ideas all the time, are thoughts constantly tumbling in your head?
  17. Management Competence-as the idea person, do you have the skill to lead the team to fruition, are you up to the task; do you have relevant skills, industry experience, confidence, commitment, fearlessness, honesty, and what is your realistic assessment of yourself as to how you will perform? Remember you can always bring good people around you to help manage.
  18. Honesty and Integrity-critical to the success of any enterprise; entrepreneurs create jobs, opportunity, and wealth; sometimes things that are not fun must be done, like pay bills late, but that’s not a measure of honesty or integrity; some of the biggest crooks in the world paid all their bills on time.
  19. Success Ethic-winners are magnetic and have a knack for leadership and success, but that doesn’t mean you never have any failures; how do you deal with failure, can you go a fifth quarter to win, how do you pull yourself up when you fall down?
  20. Looking Good in Lobby-simply addresses your professional manner, would someone want to invite you over for dinner, can you carry on a conversation, how are you preserved in the professional and private world
  21. Cash Flowing Now-the key is how early can you attract some sort of cash flow, what can you do to generate cash floe even before you launch the business; rent, consult, test market, some form of cash flow; identify a willing customer and ask for the order-perhaps even a starter order of some kind-not on credit but for cash; perhaps getting a letter of credit could generate some cash; example-collecting used tires could proceed distributorship of new tires; wood distribution could proceed furniture making
  22. Revenue Model That Swamps Costs-an intuitive element, what will it take to get your product to market, what is your expected selling price, how many units do you expect to sell and when will you receive the revenue; possible costs include unit purchased, consulting, service fees, use fees, lease, value pricing, commissions etc.
  23. Delivery Advantages-any special advantages for low cost delivery methods, lower cost delivery can add a huge financial cushion with all other costs being equal; do you know of anyone who could help with this advantage? Piggy backing, special packaging, pricing incentives, joint marketing or offering some sort of incentive
  24. Resources Available-refers to the value chain where you can create value during the creation, sale, delivery, and use of your product; make sure you know where all your necessary resources are to accomplish your business and what their availability are; make sure you know who owns the resources as it might spawn a competitor; outsourcing certain paperwork may be an important resource-payroll as an example
  25. Preemption & Domination-taking first possession or first to market offer huge advantages; uniqueness offers the opportunity for being preemptive and dominate, locking up customers, suppliers, and countries; creating new law for protection
  26. Strategy to Penetrate Market-gauges the strength of your ability to successfully launch the business; is there a weak spot in the market that you can fill; it establishes your game plan for getting in the market; look for large groups of customers in need of what you offer, look for piggybacking candidates, look for disgruntled customers, look for surprise opportunities, should be an enduring sense of urgency to launch, offering major discounts or tremendous value or service
  27. Strategy for Breaching Chasm-once you launch you must be able to see the full potential; perception-does your product have broad appeal; pitch-can it be pitched for broad appeal; packaging-enduring use and acceptance; price-can it be adjusted to long term appeal; promotion-can it be promoted in a broad way; promises-can you make promises that will appeal to a broad customer base; piggybacking-can you piggyback onto other products that makes yours more appealing; positioning-can you position your product for extraordinary lift after launch; placement-can you place your product into the market sector that soars with broad acceptance; premiums-can a campaign of premiums result in broad appeal; publicity-can you build sufficient publicity around the product; perseverance-will simple perseverance sustain your breach of the chasm?
  28. Proprietary Ownership-can you posses the product at the exclusion of others; patents, copyrights, trademarks; can the idea be bottled and sold under your exclusive ownership
  29. Partnering Candidates-is the business a candidate for partnering with a large customer, distributor, or vendor; will this allow you to move quicker; look for value chain candidates who might see the advantages of working with you-forward and backward integration
  30. Appropriateness of Location-relates to location of customers, vendors, distribution, suppliers, talent pools, and other resources necessary for the business to succeed; examples-software in Silicon Valley; Biomed in Maryland and San Diego; Media in NYC; Defense in DC
  31. Quality of Backup Plan-if your primary plan becomes blocked what can you do? If you idea goes flat can any aspect of it be saved? Investors like to see back up plans. An idea can be protected from a competitor disguised as a back up.
  32. Unfair Advantages-gaining an advantage not available to everyone-a friend in gov’t, or a friend in power yields an opportunity to market to a certain network. It may not be what you know but rather who you know. Unfair advantage may be in direct proportion to the secrecy or the prominence of the person delivering the advantage.
  33. Manageable Capital Requirements-how will the capital markets embrace your idea? The more capital you can provide of your own the better. Multiple rounds of financing can be very difficult to manage. The best time to seek capital is when you appear not to need it. Keep in mind, that if an idea is solid, it’s unique, it’s serving an unfilled need, and management is outstanding, it may be just as easy to raise large sums of capital as not. Raising capital is never easy and your first round may not be sufficient to get you to the second round.
  34. Low Capital Required-refers to low prelaunch cash required early. Low risk area. Should be enough capital to allow to attract enough customers to get through early launch phase. Perhaps stage the first round to meet certain milestones so that phase two becomes automatic. You may only have to spend low capital to bring the right idea to market.
  35. Until Launch-Refers to Low Capital requirements  #34
  36. Visible Capital-where do you find the money interested in your idea? Angels, venture capital, corporate funding, overseas, gov’t grant, or elsewhere. Who can you approach? Do you have direct access to the various sources-if not who does have access? Who has profited by investing in your industry? References within your industry will assist with financing sources. Beware of financial predators who may sound good on being able to find you money but really want too much to do it such a big stake in your business.
  37. High Potential Value-your idea is successful and proves to be profitable. What’s its worth after 5 years? Your company is attracting interest from all corners, partnership opportunities emerge, unsolicited offers to  buy your company start to pop up. Can the concept be duplicated elsewhere or in other countries? Can you acquire other companies in a roll up? Strategic partnering and licensing your idea may occur.
  38. Foreseeable Harvest-refers to investor actually getting back their investment along with desired return. How will this happen? Will it be an IPO or other method? Investors want to know the answer to this before they actually invest. Remember the legal ramifications of raising money, as it be an offering that requires securities laws. When and how will investors get their money back?
  39. Taboo-a product or service that violates some societal or cultural norm. Stay away from ideas that glorify consumption of alcohol, or promotes gambling. Be careful about doing business with old adversaries. Taboos often extend deep into the psyche. Avoid taboos. Example of taboos-unflattering acronyms, nudity, military themed channels, race, religion, health matters, weight, true hair color.
  40. Lack of Showstoppers-some aspect of your idea that can be stopped dead in its tracks-a tough competitor, a legal barrier,  a country issue or dwindling customer base. Is the showstopper financial or physical ? Big showstoppers are usually legal in nature.
  41. Pretending Not to Know-are you pretending not to know something that could derail you idea and plan? Is it caused by greed, enthusiasm for success, misguided impression or unsound reasoning? You are insisting upon not seeing something that is obvious to another. You do not listen, or hear critical information. You are inflexible, and may not understand your business. Examples might be- not understanding the issues of integrity and honesty or failing to convey the business concept or its uniqueness in a way that is comprehensible by an average investor.
  42. High Profile Person Available-could be adding high profile people to your board-names in politics, business, gov’t. Public recognition of any kind may help.can provide a rocket blast to your business. Brings instant credibility. May offer high profile person an opportunity to invest. Make sure that legal aspects are taken care of.
  43. Punchy, Compelling Story-Will your story touch on a few features and benefits? Will your story prompt immediate action by your listener? Create the elevator speech responding to the question-so what does your company do? Make your story compelling to inspire action. Short, sweet, and right to the point.
  44. Government Relevance-be careful about campaign contributions. Know the law. Understand how your local and national politicians can assist you. Look into trade associations. Understand legislation that could impact your business. Try to match your interests with theirs as this could help your business. Get to know all your politicians-mayor, council members, DA, commissioners, sheriff, chief of police, governor, Senators, congressmen/women, quasi agencies, staff leaders, etc.
Low Hanging Fruit-is there anything or anyone easy to attract to your business? Any key management people that you could easily attract? Any vendors interested in helping your company? Are there any distributors that would be attracted to your business. Any easy customers who would be attracted to your business? Speed is critical in attracting low hanging fruit. How many critical issues can be solved quickly? Can you sail through regulation quickly? Friends and family, high profile person. Quickly through legal process. Buy in by key people needed to help launch company.  Possible Board members and Board of Advisors

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