A family business isn’t immune to the many challenges that affect businesses of all kinds. In fact, there are several issues unique to family-owned businesses that go beyond the normal small business woes. So, if your business isn’t taking off, has seen a downturn in sales or is being weighed down by the numerous pressures that come with entrepreneurship, know that you’re not alone. Many businesses have overcome the odds before, and yours can too.
To help your business thrive and make it a cornerstone of your family’s wealth for years—or generations—to come, you’ll need to be able to spot and address the many issues that come with a family business. These seven problems are common among family-owned businesses in all kinds of different industries—so take a good look at your own operations and find out whether any of these might be dragging your business down.
1. Informal Financial Structure
In many family run businesses, there’s a tendency not to do things “by the book,” and that can come back to haunt you when dealing with finances. You might think it’s okay to dip indiscriminately into personal and business accounts and to keep everything in the same ledger, but these practices can create huge headaches for your business, especially at tax time.
You need to formalize your business’s finances by taking steps like setting up business checking accounts and credit cards, making sure all employees are paid a set salary or wage and rigorously tracking business and personal expenses in separate ledgers.
2. Insufficient Preparation for Challenges
The informal and improvisational management style of many businesses also means that these businesses often haven’t taken sufficient steps to get ready for the inevitable challenges. Shopping around for the right small business insurance policy will go a long way toward protecting your business if something unthinkable happens.
Getting a surety bond for your business is also important to consider. Surety bonds are required for some types of business, such as motor vehicle dealership bonds, and even optional ones such as business service bonds can be a great investment to protect your reputation and your customers.
3. Reluctance to Implement New Methods and Techniques
Family businesses often fall victim to an overly traditional and conservative mindset that resists positive change. This can be especially prominent in businesses that have been in the family for multiple generations, as there may be many elements of the old business model that have been hanging around out of sheer inertia.
Take a look at what your competitors are doing and see if you’re lagging behind, and make sure you’re keeping up with the latest innovations in your field by reading trade publications and following innovators online. Of course, don’t jump blindly for modernization’s sake into a new investment that doesn’t make sense—but always keep the possibility in mind that the way it’s always been done may not be the way to do it now.
4. Pressure on Family Members to Complete Work They’re Not Suited For
The truth is that not everyone is suited for every job. Most people can learn a given skill with time and effort, but when someone isn’t interested in or truly skilled at their job, the business will suffer. There can be a lot of pressure—even if it’s unspoken—for family members to work in the business, even if they don’t really want to be there or don’t have the aptitude.
In the long run, this practice is almost guaranteed to create tension and harm the business. Thus, it’s always better to bring someone in from outside or promote a deserving non-family member if the alternative is someone who’s in the family but really isn’t the right fit.
5. A Culture of Insularity
A business thrives when everyone is on board, and many of the most successful businesses are the ones that employees describe as having a family feel. However, the atmosphere of working in an actual family business can feel insular and even nepotistic if the business owners aren’t careful and diligent about making sure that non-family employees feel that they have a stake in the business and a say in decisions that affect them.
If your business is struggling, give some thought to whom you promote and whom you give the most responsibility to. It’s possible to box out non-family members by accident simply because family members are the first people you think of to delegate to.
6. Generational Conflicts and Succession Problems
It’s common knowledge that younger and older generations often have different expectations and beliefs about work. That gap can become even more pronounced—and more problematic—when it’s in play in a business. Try to accommodate different working styles and consider that there may be multiple right ways to do the job. And while we’re on the subject of generations, it’s incredibly important to have a firm succession plan in place. Over 80 percent of family businesses don’t have them, which is a guaranteed recipe for conflict and chaos down the line.
7. Family Relationship Issues
Maintaining good family relationships can be a challenge at the best of times, and when there’s a business in the mix, conflicts can boil over and spill out into the business side. Don’t underestimate the value of seeing a family counselor. It can dramatically improve relationships to have a safe space in which to talk about emotions, relieving tension on both the family unit and the business.
A family business combines all the challenges of running a small business with all the challenges of modern family relationships. So, needless to say, it isn’t easy. The best way to address those difficulties? By being prepared to navigate the challenges and getting ready to make the changes that will take your business into the 21st century.