Establishing a family business has its own advantages and disadvantages that are worth looking at closely. While it can provide stable leadership, it can also promote right over competency.
What's in this guide?
What is a family business?
A family business is a corporate venture that comprises family members. It includes several possible combinations such as father and mother, parent and children, and extended families actively taking up leadership, advisors, and employee roles for the success of a business.
Family-owned business provides numerous benefits not only for the family but also for the masses. It promotes the growth of both local and global economies.
Ideally, it is interesting and great to run a family business because it’s everyone working together to make a name for the family. Family businesses also have the potential of increasing the bond between family members since everyone is working towards achieving the same goal.
However, inasmuch as family-owned businesses have their benefits, they also have their other side. There are lots of stories about businesses that were started by families and failed.
So, if you are planning to run a family business, you should be aware of the pros and cons involved to be able to make a well-informed decision.
Also Read: How to sell more in your business? 10 strategies to achieve it
Pros of having a family business
Here are the key advantages of having a family business:
1. The activity plan can be adjusted
One of the pros of having a family business is the ability to adjust work schedules to cover up for each other when the need calls for that. If something urgent that requires immediate attention happens each family member can shift working hours to blend into the situation.
A typical example is when there is a child’s activity in school that calls for your presence. Someone else in the family can quickly fill up that space and do the work necessary on your behalf for that day which might be nearly impossible if it is a non-family business.
2. It saves money and time
Running a family business helps to save the money and time that is supposed to be spent if you hire non-family members as employees. You don’t have to spend money and time running advertisements and conducting interviews to hire your staff or employees.
Also, you can make a family member handle more than one position, based on their capability, which means you won’t have to pay an employee to handle the individual positions.
3. High commitment level
Talking about the commitment level in family-owned businesses, members tend to show a greater sense of commitment than in non-family businesses. That’s because every member would more likely have the interest of the family business at heart – knowing that if something is to go wrong, not only the company will be affected but also the needs of the family.
Also, family members tend to stand by each other during tough economic times. When the financial status of the business is going down the drain, they can go to the extent of not collecting salary and even using their money to fund the business.
Also Read: How to start a thriving business in Africa
4. Decision-making is relatively easier
Decision-making in a family-run business is relatively easy since there are fewer office politics. Family members tend to agree to each other’s decisions without any grudges.
This means work will be more easily done because decision-making does not have to pass through the board of directors before being implemented.
5. Stable leadership
The leadership of a family business usually depends on the position of each individual in the family. This means there will always be stable leadership to ensure the smooth running of business affairs.
The business leader will stay in the position for a long time except if illness, death, or any other life event triggers the change in the leadership position.
6. It provides a more relaxed environment
Family business provides a more relaxed working environment for everyone. Arrival and departure times are not strict, and you can take more time off for your personal services. As long as there is no conflict among family members it will be more appealing to work in a family-owned business. Imagine being in a non-family business with a strict policy, hardly will you even be able to take time off work for your personal affairs.
Also Read: How to start an interior design business in Nigeria
Cons of having a family business
Here are some of the disadvantages of having a family business:
1. Personal conflict between family members can interrupt business.
The biggest challenge faced by family businesses is conflict. If there is any disagreement among family members, it will greatly affect the productivity of the business since there would be a lack of cooperation and a slow work rate.
2. Limit to fresh ideas
Another con of working with family members is that there’s more likely going to be the recycling of old ideas. And fresh Ideas are what make businesses grow.
A family-owned business is not like a personally-owned business where you can easily hire new employees with different innovative ideas.
In a family business, you’ll have most members always thinking along the same lines during business meetings. And this might make it difficult to discover blindspots that will stunt the growth of the business. That’s why there will be boring brainstorming sessions.
3. Higher chance of gross indiscipline
One of the problems of a family business is that members tend to break rules, even without a sense of guilt.
For instance, punctuality is one of the easiest rules to violate. That means members of the family involved in the business may come to work anytime because they know they won’t be fired.
Apart from violating punctuality etiquette, members of the family business may also violate other important etiquettes that are important for business growth. Such as not meeting up with deadlines, taking a leave of absence from work often, etc.
Also Read: 15 Best tax-free countries in the world
4. Familiarity
If a family member has to receive criticism or correction on poor work performance, such a family member may take it lightly or get offended.
That’s because of familiarity – since everyone in the family already has such strong emotional bonds.
5. Right over competency
Even though some family members are not qualified for a particular position in the business, they might insist on giving the position to them. They claim that it’s their right without considering whether or not they are qualified for that post.
Having to put a member in a position not because they are competent enough to handle the responsibility involved can spell doom for the business.
Conclusion
Generally, whether it’s a good idea to start a family business or not depends on the individual members of the family. That is, if you have family members that you all respect each other and have the needed competency and united desire to make the business succeed, then a family business will be just fine.
And on the other hand, if you have family members who are rude and/or not competent enough and lack enthusiasm for business growth, then there’s no point in starting a business with them.
