The Good, The Bad and The Ugly of a Family Business

It is said that a family business should be the perfect model for build a company. Why? Well, very simple, your parents, children, brothers or cousins ​​should without a doubt be your best allies when it comes to do business.

Trust and good relationship are very positive factors for the success of a company and exploiting these values ​​as a family is the secret of many corporations that transcend. However, not everything is taste of honey, Family businesses they also have their problems.

I have the pleasure of meeting several renowned entrepreneurs whose companies have been founded under the philosophy of a family business, where middle managers, managers, directors and key decision-making positions are filled by close family members.

Personally, I have seen with pleasure and amazement how harmoniously these businesses can function when their gears are perfectly matched thanks to an excellent relationship of trust.

The good thing about a family business

  • Common goals can be more easily developed
  • There is usually a greater commitment from bosses and managers
  • Confidence is generally one of your great strengths
  • Managing finances is more conscious
  • Expansion can be easier when you have family members willing to take on new challenges
  • They can transcend generationally more easily
  • The family unit can withstand difficult times in companies more easily, especially at the beginning or in times of economic difficulties
  • They are based on family values
  • The skills of each member involved in the business can be used more effectively, that is, “shoemaker to your shoes”
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The downside of a family business

  • If you are not careful, you can tend to lack of diversification
  • The lack of trust or commitment of a family member can trigger serious problems due to the weakness in the areas that said member is in charge
  • The business can be exposed when family members are included only by affinity when they do not have the capacity to hold important positions
  • Conflict management can become complicated when emotions are involved

The ugliness of family businesses

  • It is very common for businesses to succumb when the third generation loses the objectives, vision or work discipline of their predecessors
  • They are very vulnerable to relationship problems between their members
  • Family problems can easily translate into business problems when care is not taken to separate the two functions

As you can see, the good thing is that advantages of a family business outweigh the disadvantages. However, some ideal recommendations for forming a family-based company are:

  • Set clear rules of work among members that includes a serious commitment on the part of each member
  • Learn to differentiate family functions from business functions. Your son can be a son at home, but if he is the financial manager in the company, he must be given full authority for decisions according to his role
  • Establish a Magna Carta or a family pact or agreement that establishes in writing and with total clarity, the vision, mission and clear objectives of the company so that everyone is clear
  • Clearly define an organization chart with functions of each member that everyone knows and can respect
  • Train the little ones so that they can learn the business and corporate culture in such a way that the continuity of the company is guaranteed
  • Develop an organizational culture to teach its members to separate family interests from business interests. House problems should stay at home and business affairs by closing the door.
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For this and much more, building a family business with your wife, children, and grandchildren should be a very rewarding experience.

What do you think? Why don’t you share your experience as part of a family business?

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