Pros and Cons of a Family Business
How to open a family business
Kolya, they took everything from me. <…> If I do not decide anything with the bank, they will take my apartment. And if I do not decide anything with Kazim Akavovich, they will take me away from me.
What is a Family Business?
From the name, it is clear that this is a business organized by close or distant relatives belonging to the same family. A family business, or family business, is inherited. According to its structure, size, management, the concentration of capital, the family business is conditionally divided into two types.
The first type is a small company where several people work – usually no more than 10. As a rule, these are the closest relatives: mother, father, son, daughter, son-in-law, daughter-in-law. In such companies, the leader is the head of the family, who also performs the duties of a driver. The role of the accountant and seller is taken by the wife and daughter. Small shops, recruitment agencies, travel agencies, etc. work on this principle.
The second type is large firms inherited from generation to generation. For example, in England, 16% of family-owned firms survived four generations. Typically, a family in such firms jointly owns a controlling stake.
In Russian business, large family corporations are practically absent so far – the most promising family business related to trade. Usually, these are small, highly specialized stores. The family business, which is associated with trade based on small production, is also popular. It can be mini-shops and trading floors at the same time, for example, mini-bakeries.
And the third place is occupied by the family business in the agricultural industry, in particular the maintenance of a small poultry farm or pig farm. A family business, like any other, is aimed at generating income, only in this case – family. And his organization has its pros and cons.
What are The Benefits of a Family Business?
1. Often, a family business continues the tradition of more than one generation, that is, mentally, people from childhood are tuned to what they will do in the future. And this attitude becomes the key to a successful family business.
2. A family developing a joint business usually has its own secrets and keeps them for future generations. This enables its representatives to start their start from a higher level.
3. Business partners – members of their family can be trusted without preoccupying with preliminary checks and without fear of hoarding and intrigue.
4. Family business, if all members of the family are interested in it, promotes its unity, develops a sense of mutual assistance among them.
5. Children can actively participate in the joint business, performing the work available to them. Firstly, in this way, they can develop their abilities, acquire the necessary skills in order to continue this work in the future. And secondly, they will learn to realize the value of money earned with their own hands.
6. The family business has additional incentives to achieve high results because the reputation of the family and the result of the whole business depend on them.
7. In the family business, a person plans his time and his own boss. In addition, the profit from the family business remains in the family.
However, the family business is fraught with pitfalls in the form of the same family relationships, which can cast doubt on all its advantages.
What To Fear in the Family Business?
1. As you know, relatives can also betray. As the wise Mark Twain wrote: “If you need money, go to strangers; if you need advice, go to friends; and if you don’t need anything, go to your relatives. ”
2. Monetary disputes too often destroy family relationships.
3. If a family business falls into bankruptcy, then the whole family risks falling into a debt hole.
4. Often conflicts occur in the family business on the basis of the fact that, as they say, “the family has its black sheep” – one of the family members begins to neglect their duties, counting on the favor of the rest.
5. Lack of ability and interest in the case, the inadequacy of the position of one of the relatives, who have to be hired only because he is a family member.
6. Not all family members understand that family and business relationships are two different things.
7. The founder of a family business may cease to enjoy authority and the rest of the family will not want to obey him.
8. A new family member may appear in the family team, more successful and authoritative, while a conflict with the previous leader is possible.
9. Each family “has its own skeletons in wardrobes”, which in conflicts threaten to fall out to the detriment of the cause. Moreover, envy and ambition are often present in any team, and the family is no exception.
10. Practice shows that few family-owned enterprises manage to “survive” at least until the third generation. As a rule, on the second – the heirs of the founders – they cease.
So, a family business has its own attractive aspects, so those who still intend to do it can be advised:
1. Provide strong leadership by setting strict rules from the start.
2. It is safer to open a family business with useful contacts and experience. Perhaps, for starters, it is worth working in the same field with someone in submission to see the whole process from the inside.
3. Materially responsible positions, for example, related to finances, are not recommended to be given to non-blood relatives. For example, people who got into a family through marriage.
4. You should not hire relatives with whom it is difficult to reach mutual understanding or agreement. With teamwork, the odds will only increase.
5. Preference should be given to relatives with personal and professional qualities necessary for business development.
6. If children are not eager to participate in the family business, do not “drag” them into it by force. As world practice shows, there will be no sense anyway.
7. Any business is a great physical and psychological load, so you need to remember that everything has its time and does not cross the line that separates working time from personal, business relations from family ones. Otherwise, an emotional breakdown is provided.
8. Fully involved in the business, you must not forget about the rest. After all, in the family business, there is no person responsible for the vacation schedule.
9. The functional responsibilities of each should be clearly defined. Do not abuse requests that go beyond them.
10. Everyone’s work must be paid on time and in accordance with the salary, not expecting that relatives will enter into some position and can wait.
11. As much as possible to control income, expenses, profit and cash flow.