Together Forever: 6 Challenges Every Family-Owned Business Faces

Business.com / Strategy / Last Modified: February 22, 2017

Working with family can be a blessing and a curse. These are a few challenges common in family-owned businesses.

At one time, family-owned businesses were commonplace.

Shop owners ran their storefronts for decades, then passed them on to their children when they retired.

Today’s business owners don’t include family members nearly as often, especially if the businesses weren’t passed on to them from their parents.

However, family-owned businesses still exist. In fact, many locally-owned stores and restaurants are run by families, especially in smaller towns.

These businesses can bring families closer, allowing them to spend time working side by side all day, every day.

Unfortunately, they also present many issues. Here are a few challenges common in family-owned businesses

Related Article: Innovation to the Rescue: How This Entrepreneur Transformed a Family Business Using Digital Micro-Targeting

Accusations of Nepotism

In a family-owned business, members are often given jobs merely because they’re related to the owner.

This can extend to an owner’s siblings, spouse, children, cousins, and nieces and nephews. These workers may find it necessary to prove themselves, especially in family-owned businesses that hire non-family members.

For those who inherit ownership of a business after a relative retires, employees and others in the community may have difficulty accepting the new owner.

For best results, leaders in family-owned businesses must make an extra effort to enforce policies uniformly to ensure things are fair for non-family members.

Separating Business from Personal Feelings

One of the biggest issues family-owned business workers face is separating business from personal feelings.

If one family member is going through a divorce, for instance, relatives may give that person more flexibility during that time. Professional decisions can also be affected by longstanding personality differences, interfering with daily operations.

Personal events can also suffer from the professional relationships between family members, with resentments coming out at dinners and holiday celebrations.

Family members should make an agreement to only discuss business matters during work hours.

Generational Issues

A family-owned business typically combines multiple generations of workers, with the older generations feeling passionately about the business they consider their own.

Younger family members may come in with their own ideas about how to win new customers and more productively run day-to-day operations, but older family members might not listen.

This is especially true of businesses that have been passed down from previous generations, with little having been changed over time. One solution might be to come up with an agreement to allow younger-generation family members to add one new feature on a periodic basis.

Older family members may also need to step back and realize that the information that younger generations bring to their business can be vital to attracting new customers.

Related Article: Family Affair: The Pros and Cons of Having Family Members for Business Partners

Pressure to Stay

As Warren Stephens learned when taking over his father’s investment banking firm, running a family-owned business can be a great start to a successful long-term career.

Whether a professional starts with a restaurant, retail store, or service-based organization, being in a leadership role can open up new possibilities for an entrepreneur who might eventually want to move on to other things.

Often these types of businesses allow family members to observe everything from accounting processes to customer relations from a young age and catalog that information for later use.

For some young professionals, however, a family business can serve as a prison of sorts, keeping them from pursuing their own dreams since they’re expected to help continue the family legacy.

Older generations should be prepared to pass their businesses on to other family members or, if necessary, non-family members if their own children aren’t interested in taking over.

Pressure to Succeed

Small businesses have high failure rates, but someone taking over an established company may think that business is immune from the typical issues.

With fierce competition from chain restaurants and big-box retailers, it has become harder than ever for locally-owned businesses to compete.

New generations may feel intense pressure to avoid running the family operation into the ground, feeling a responsibility to previous generations who worked so hard to build it.

These business owners may also feel torn between adopting new, more popular methods of doing things and holding to tradition.

As part of taking over the family business, younger family members should make it clear that they aren’t making a commitment to continue the business for decades without changing it.

Older generations should be willing to let younger leaders make those changes if it improves the business.

If an owner has one clear person in mind to take over at retirement, the transition can be fairly simple. However, the process isn’t always that straightforward.

Sometimes more than one person wants ownership and feels resentment at not being chosen. On some occasions, the best fit for the role has no interest in running the family business, while a far less responsible family member is ready to take over.

If a business owner dies before a succession plan has been put in writing, a family battle could ensue. It’s important that family-owned business owners get legal consultation on the best way to plan for and manage a transition.

Related Article: The Show Must Go On: The Importance of Business Succession Planning

Family-owned businesses have a link to history that consumers enjoy. However, the management of these organizations can be complicated.

It’s important that family members learn to keep their personal feelings out of decisions and put the business first during working hours to enjoy long-term success.

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