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5 Unique Challenges of a Family Business

Family businesses can absolutely be successful, but they can also easily implode as well.
Andrew Deen has been a consultant for startups in almost every industry from retail to medical devices and everything in between. He implements lean methodology and currently writing a book about scaling up business. Twitter @AndrewDeen14
Andrew Deen has been a consultant for startups in almost every industry from retail to medical devices and everything in between. He implements lean methodology and currently writing a book about scaling up business. Twitter @AndrewDeen14

Family businesses are more common than many people think. An amazing 90% of American companies are family-owned, and they can bring with them family-sized problems. Running a family business definitely has its perks—there’s the in-depth knowledge passed down from generation to generation, the deep commitment to the business, and the closeness between family members. However, there are also many challenges that can come up in a family business that are much less likely in a business with no family ties. Family businesses can absolutely be successful—many have survived throughout several generations, and out economy would be crippled without them—but they can also easily implode as well. If you’re involved in a family business, here are five common challenges that are best prevented before they ever become a problem in the first place.

1. Personal and Professional Lives Run Together

One of the most obvious problems that can crop up in a family business is that the personal and professional can easily run together. Whether the family lives together or not, there’s often too much “togetherness” and it can be hard to leave work at work. Because family members know what’s going on in each other’s lives, they can read into a situation inappropriately, or make personal attacks that aren’t relevant to the running of the business, harming both the relationship and the company. An otherwise pleasant family event can easily turn into a heated business discussion—or the other way around. Too easily, tempers can flare and feelings get hurt. Learning how to self-regulate can help in these situations and potentially save your family relationships too.

2. Generational Conflict

Another common issue in family businesses is that generational conflict can cause arguments about how the business should be run. A parent or grandparent may not understand a child’s desire to put resources into digital marketing, while a child might not understand the wisdom and experience their older relatives possess, for example. Working together to see the value in both viewpoints isn’t easy, but it can have benefits for the business in both the short and long term.

3. Lack of Innovation

You know how everyone in your family has the same laugh? Those similarities can also extend to ideas—which can be a problem for a business’ long-term success. Innovation is crucial as the economy and different industries grow and change, and all businesses must be able to adapt and change as time goes on. This is especially true for brick-and-mortar stores that need to keep up with the growth of digital sales. Without outside perspectives, creative thought can stagnate, and groupthink can reign. Of course, the opposite can happen too, and no one agrees—but that’s a different story altogether.

4. Feelings of Obligation

Though many people are happy to carry on with the family business, and feel passionate about making it successful, others might not be so thrilled. Some family members may be participating out of obligation—which can make their contributions and quality of work lower than other members of the family. The last thing you want is a resentful employee—especially if you have to see them at Christmas, too.

5. Hierarchy Isn’t Always Defined

Not wanting to step on other family members’ toes, hierarchy often takes a back seat in a family business. This can cause massive conflict, as some family members try to take control and end up butting heads with others. In addition to the toll on the business and the stress on family members, an ill-defined hierarchy is awkward for outside employees as well. They might not be sure as to which person has the final say, and may be prompted to take sides in times of conflict. This can lead to high turnover and general disorganization in the business.

Structure and Balance: Keys to Success

While running a family business or working in one can be inherently more complex than working for someone else, it can work—if everyone agrees to prioritize structure, communication, and balance. The best way to prevent some of the challenges discussed above is to run the business like any other business—as if family wasn’t a factor at all. This means clearly defining roles, creating a succession plan, and making decisions based on data rather than emotions. (Keep in mind that 44% of business executives feel data has become an important tool that drives strategic decisions.) When everyone works together, a family business can be the most satisfying business of all.

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