The advantages of a family business
If you already run a small family business or you’re thinking about bringing a family member on board, you’re in good company. According to SCORE, the U.S.’s largest network of small business mentors, 19% of the 28.8 million small businesses in America are owned by families.
In our personal lives, our family is our team. So it makes a lot of sense to bring the teamwork, camaraderie and shared values of family life into our professional lives. Here are some of the top benefits of making your small business a family business.
Personal relationships are the foundation of a strong company culture
Relatives are a known entity. Instead of spending time finding new employees — and taking a risk on the unknown — you can take the familiar (familial!) path instead. You’ll already know your new partner’s/employee’s strengths and weaknesses and can build a solid business from that strong base.
Family relationships inspire deep trust and loyalty
The trust and loyalty that exists between family members is one of the most significant advantages to working together. Strong family ties are based on mutual support and commitment. The long-standing bonds and shared history among relatives can result in more effective collaboration and foster a deep sense of trust.
Family-shared vision unites your family-owned business
Family-owned businesses often thrive on a shared set of values and a long-term vision that is passed down through generations. This alignment creates a strong sense of purpose and unity among family members working together.
This shared vision also contributes to the development of a unique company culture that reflects your family’s values and creates a distinct identity employees can rally behind.
Working with family members can offer flexibility
Working with relatives in a small family business often brings a level of flexibility that may be harder to find in other work environments. Family members are more likely to be empathetic and accommodating when it comes to personal matters or unexpected emergencies — which can be a great help when you’re trying to balance your professional work with your personal life.
Family-run businesses inspire long-term commitment
With a vested interest in the success and longevity of the business, family employees often demonstrate a higher level of dedication and loyalty and bring a greater sense of pride and responsibility to their work. They are also likely to go the extra mile — many times above and beyond non-family employees — to ensure the business thrives.
You’re building the foundation for a second-generation business legacy
When you run your own business, you invest huge amounts of time, effort and heart. With so much invested in building your business, it can be sad to imagine closing it down or leaving it to a stranger one day. But with a family-owned business, it’s a natural progression to keep business ownership in the family, eventually passing the business on to another family member. This kind of succession planning is an important move emotionally and financially: You get to share something important with the people closest to you while leaving a valuable asset for the next generation.
The challenges of a family businesses
Of course, owning a small business and working with family members isn’t that simple. Just as family dynamics can be complicated around the dinner table, issues can become exacerbated in a work setting. Here are just a few of the potential challenges that small family-owned businesses face.
Non-family members can feel left out
Working in a small family business can be an uncomfortable experience for employees who aren’t members of the family. They may wonder if they’re being left out of decision-making processes or if there’s unequal treatment of different employees. They may even be worried about getting caught in the middle of family squabbles.
Decision making can be limited by shared perspectives
Because family members often share similar backgrounds and experiences, this can lead to groupthink which can hinder innovation and creativity when it comes to making important business decisions. If you’re going to work with family members, make sure to invite diverse perspectives and fresh ideas from outside the family unit. Being open to external voices can help your business gain valuable insights, alternative approaches and fresh solutions to problems.
Family member skill gaps can create business expertise gaps
While loyalty and trust are valuable, you should prioritize hiring decisions based on competence and expertise to ensure your team has the necessary skills and qualifications you need across the business.
If you over-rely solely on family members, this can limit your ability to attract and retain the most qualified individuals — and this can potentially have a negative impact on growth and innovation. Make sure you’re able to objectively assess your business needs and that you’re open to looking outside the family for key positions as necessary.
Family-run businesses blur boundaries between professional and personal relationships
One of the challenges of working with family members is the potential for blurred boundaries. Disagreements or conflicts that arise in the workplace can easily spill over into family gatherings, creating tension and strain.
It can be challenging to separate business decisions from personal feelings, but that’s why it’s crucial to establish clear communication channels and conflict resolution strategies to maintain healthy relationships — and a healthy business
The success of the business is at risk when you put all your eggs in one basket
If you rely solely on family members for key positions, that can create certain risks. For example, if your business encounters challenges or faces a downturn, it may be more difficult to navigate and recover. When your entire family’s livelihood is at stake, you won’t have a backup to see you through.
Succession planning can create conflict
In a family-owned business, it can be a complex and delicate process to determine — and make a smooth transition to — the next generation of leadership. When the current generation retires or steps down, you may have disagreements and face conflict as you try to decide who will take over the business. Without a well-thought-out succession plan, your business could face instability and you may experience rifts among family members.
Family-run businesses: 9 best practices
Every family business is unique, so you’ll want to adapt this guidance to best suit your personal situation and family dynamics.
But generally speaking, here are some best practices:
1. Define roles and responsibilities to avoid family conflict
Clearly assign tasks based on individual strengths and expertise, ensuring everyone understands their contributions and areas of authority within the business.
2. Establish open communication between family members
Emphasize open and transparent communication among both members of the family and non-family employees to avoid conflicts. Making space for regular family meetings and business discussions can help ensure alignment with the business’s goals and vision — and each other.
3. Separate personal life and professional matters
Establish clear boundaries between personal and professional relationships. This can help you avoid the mixing of emotions and personal issues — at least within the work environment.
4. Maintain a healthy work-life balance
Strive to maintain a healthy balance by encouraging downtime, family activities and personal growth outside of work.
5. Take extra precautions to protect your small business
Offset some of your business risks with relevant business insurance coverage, such as general liability, workers’ comp and commercial property. Ensuring your business is properly covered gives you one less thing to worry about and potentially squabble over.
6. Plan for family conflict resolution
Chances are…conflict will happen. So develop a fair and impartial process for resolving disputes among family members. Keep in mind that seeking professional, impartial mediation outside the family can sometimes be necessary.
7. Seek external expertise outside of members of the family
Engage consultants or advisors who can provide objective insights and guidance to resolve conflicts, offer strategic direction and bring fresh ideas.
8. Develop a succession plan
Create a well-thought-out plan for leadership transition. To maintain business continuity — and peaceful family relations — make sure to involve all relevant family members from the outset.
9. Stay agile and open to change
Be careful not to get stuck in old family ways, old family patterns and old family belief systems. Embrace innovation, be open to new technology and stay on top of market trends to keep your business competitive.
