SOME CHALLENGES FACING FAMILY OWNED BUSINESSES

Many businesses are family owned businesses as it is easy to find family members and start a company. For many family owned businesses, here are the common challenges faced:

1. Informality

Most family business are informal and do not have much structure or policies. Communications may be informal and may be influenced by political divisions or other relationship problems.

2. Limited Opinion

As the family business usually hires family members, there may be lack of outside opinions and this limits the diversity of ideas required to expand the business.

3. Lack of Talent and high turnover

Hiring family members for high positions may prevent really good talents from joining the business as there is a "glass ceiling." Some family members may even lack the skills required for the job, and firing a family member is hard. When employees feel that the family will always promote over outsiders and when employees realize that management is incompetent they will leave.

4. Conservative and paternalistic

Because most family owned businesses are run by older family members, there is a resistance to changes and new ideas proposed by younger family members and tradition will prevail over best practices.

5. No clear exit strategy

Family businesses usually run till they fail. At no point of the business do they call for a valuation or plan to increase or decrease its value. There is no plan to sell off and go into another sector. Only in very few instances that they come together and agree to sell shares to competent managers and public.

6. No clear roles or training

Family members may be placed into positions which are not good or fit for them, and it is done so due to relationship in the family. There is often no formal training, documentation or business continuity plan if a family member has to retire or leaves the company (or dies).

7. Growth

Due to lack of capital, talents, new investments or resistance to reinvest in the business, family businesses often face challenges in growing or expanding regionally or internationally.

These are the common challenges faced by businesses. If you plan to start one, perhaps you can think of overcoming some of these challenges as you write your business plan. And if you are a part of any successful family business, kindly share with us how you or your family overcame these challenges and made the business successful.

Also read: Overcoming your business limitations, Increase your business productivity, Home based business: the Quiz, the Plus and minus, the Potholes and How to revive a dying business

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