Challenges Every Family Business Faces

Everyone dreams of starting a business; a family business which they hope to reap big out of. Starting a family business is as easy as the click of the button but with the many challenges that usually accompany such an ambition, it is prone to failure.

However, starting a family business and maintaining it is a lucrative outlet that one would wish to venture in. A family owned business has a unique set of challenges which if not monitored and countered at the earliest stage possible leads to the failure of the business.

Just like any other business, a family business goes through various developmental stages over a wide period of time.

There are various challenges that a family business faces that one should always be aware of to help prepare to counter them and hence leading to a successful family business enterprise.

Family business simply means that partners and stakeholders are family members. The mere fact that family members are stakeholders is a problem on its own. Family relationships are attached together through emotions and emotions greatly affect businesses. For instance, in the case where a wife and a husband co-own a business, such a business faces failure in case there is a divorce or separation. If a strained relationship takes a legal angle; the assets might be divided between the aggrieved parties. Family businesses are, therefore, at the risk of family problems such as divorce, separation and to some extent, diseases.

There is minimum authority over other family members in a business enterprise. Family members are usually close to each other, making it difficult to exercise some form of authority over them. This lack of control, especially in the absence of a sole source of authority and command seriously affects a family business. This also leads to inadequate participation from some family members who also have a say in the business but feel like they are not answerable to anyone else but themselves. There is therefore need to establish a clear chain of command in a family owned business from the senior most going down.

Communication is key to the success of any form of business including a family business. In the absence of proper communication therefore, problems are prone to arise that will negatively affect a business. Communication problems are usually provoked by authority confusion where there is a breakdown in the chain of command along with emotions such as jealousy, anger and fear, different political beliefs and other social relationship problems. Breakdown in communication breaks down the chain of operations in a business and if there are no operations then there is no production.

Most family members have little or no knowledge at all about the world of business but are usually involved in making serious business decisions on the mere fact that they are shareholders. Decisions may either make a family business successful or a failure. Bad decisions are detrimental to a business especially if those making important decisions have no knowledge about the decisions they are making.

There is also lack of a shared vision and an absence of strategy for the future of the family business. This is actually the cause of major arguments and wide rifts in a family business. In many cases, the lack of a clear direction which a family business should take usually leaves the business at stake simply because major stakeholders lack a common ground to share a common vision. Without a clear, as well as a measurable vision shared equally in a family business, the business will always face arguments between generations to come about where the business is going, how to get there and the strategies and tactics to achieve the same.

Absence of a family constitution about the business policy pose a huge risk and has the potential for instigating a family conflict that might plunge a business into turmoil. A good family business must have a well written constitution and every family member who holds a stake in the business must be made aware of it including those family members who have no shares in the business. What are the rules for discussing a family business at home? How are additional family members brought into the business especially through marriage or even remarriage? All these issues should be underpinned by a written document or agreement.

Most family businesses lack a succession plan and most of those who own shares in such a business rarely give it any thought. There is usually no plan of who to take over after the demise of the main authority in the business. In most cases, the siblings fight over who takes over and in the process, bring to an abrupt end to an already established business. There is also no formal training given to the successor of a family business and this usually leads to mismanagement and hence leading to the failure of the family business.