A family business can be great. You’re working with people who are closely related to you, which means solid trust is built right into the business. Even giants like Walmart and Berkshire Hathaway are prime examples of family businesses.
According to the US Census Bureau, nearly 90% of all businesses in the US are family businesses. But this doesn’t mean that family businesses are always smooth sailing. There are many dangers, some so serious that your business could go bust.
To help you identify and navigate these pitfalls, we’ve put together this guide.
Dangers to a family business
1. Running the business through emotions
One of the biggest mistakes you can make while running any business is managing it through emotions, and this is an even greater danger in a family business.
Getting feedback or criticism from your peers is challenging in itself, but when it’s coming from your family, it can strain and stretch relations and even sink your business. Emotions can also hinder your decision-making capabilities.
The situation becomes even more vexing if you’re directly managing a family member, as each word has the potential to be misinterpreted and can affect both your personal and professional life, so tread carefully.
2. Failure to implement efficient business tools
To improve the efficiency of any business, it’s important to leverage business tools, especially when it comes to sales.
Sales need to be monitored regularly and you need to have a detailed snapshot of who is getting what done.
Deploying an efficient field sales management software solution such as Skynamo, means you can seamlessly monitor your sales. This will help each family member understand how their efforts, or non-efforts, are affecting the company.
This can push them to take ownership and also helps avoid potential conflicts that may arise, since the evidence is there for all to see, and no one can say they’re being picked on.
3. No formal succession plans
Nearly every family-owned company leader hopes to pass the baton to another family member when the time comes. Fulfilling that hope, though, can prove to be surprisingly difficult.
Only about 30% of family businesses make it through to the second generation and about 10% of them manage to last until the third. However, for a business to sustainably move from the first generation to the second, you need to have a formalized succession plan in place.
Yet only 34% of businesses have such a plan, which is dangerous: the death of an important member could leave your business in a precarious position, and the power vacuum might lead to clashes with the family.
That’s why it’s absolutely critical to outline a succession plan and communicate the same with all your family members. This will ensure that your family business will be able to survive even the worst of the stormy sessions that usually bedevil succession.
4. Nepotism and personal bias
Personal biases can alienate your employees and coworkers, and is a particular danger if you’re running a family business where ‘outsiders’ are working too, and certain family members are seen to be favorites.
Employees just won’t see any opportunities to grow in your organization, and you may lose them, or productivity may drop.
Ensure you treat everyone in your company on merit. You should avoid nepotism at all costs and afford equal opportunity to all your employees.
5. Family Conflict and Disputes
A family feud – whether personally or professionally motivated – can lead to a complete collapse of trust that can shake the very foundations of your business, and create a toxic working environment.
It’s critical that you address these issues and solve them early. Leaving them to linger in the hope that the situation will resolve itself could have dire consequences for your business.
Don’t wait for your family business to blow. Book a demo today and gain clarity on and control of your business while maintaining the family harmony.