Guest Post: 5 Crucial Problems of Family Businesses

It’s guest post week. Today I have Dayton Uttinger talking about the troubles many family businesses face. Here’s Dayton:

You’ve overcome the twelve different obstacles that others have set for you and the forty that you created for yourself and you’re finally embarking on an entrepreneurial endeavor.  The doors are weeks away from opening your vision to the public, but there is still a mile of hurdles in front of you, including staffing.

Naturally, many new business owners turn towards their family, or rather their family turns to them.  It’s presented as mutually beneficial: the family member is getting a job and the owner is gaining an employee that – theoretically -cares about the business as much as they do.  Seeing little downside, business owners staff their front desks, kitchens, or even management with family.  This is a great way to interact with the people most important to you every day and you’ll never struggle with the name of the new sales associate.  However, the verdict is still out on whether or not family businesses are more successful than their publicly-owned counterparts.   Despite this uncertainty, families own or control 90% of all U.S. businesses.  The trend is clearly here to stay, but it has own set of concerns.

Expectations of Nepotism

Everyone wants the best for their family but your business is not necessarily the place to do your relatives favors.  Your other employees will inevitably treat everyone in your family differently, regardless of title, and expect you to treat them differently as well.  I waitress at my mother’s restaurant and when I get the good shift over someone else others don’t believe it was a professionally motivated decision.  So be aware of your employees’ perceptions.  This isn’t to say that my mother can’t ever schedule me for a Friday night, but if I’m always chosen over someone else, that’s a problem.

Similarly, your family might expect a certain amount of favoritism.  If a promotion opens up, they might be hurt if you don’t offer it to them first.  They could be assuming that they will take your place when you retire.  This isn’t surprising, when only 16% of family businesses have a formal succession plan.  Set expectations as early as possible.  Let your family know the order of inheritance or if you are planning on selling.  Family members will often plan their lives around the business, so don’t give them room to misjudge their place and blame you later.

Trusting Family?

This is a sensitive topic.  If there’s anyone you can rely on, it’s your family, right? Maybe.

You don’t have to be cutthroat to succeed in business, but there is a healthy amount of cynicism. Your family wants the business to do well, yes, but they don’t need to be in the center of everything.  Other employees are shocked when they find out that I don’t know the alarm code to the restaurant, but that’s as it should be.  Why would I need it?  If you wouldn’t give the information to another employee in the same situation,  don’t give it to your family either.  

Take precautions if you share a computer.  Maybe your family would never jeopardize your business, but that’s not all you have to worry about.  Inevitably, you’ll be in possession of some sensitive information about other employees, and that information should remain private.  They didn’t release their address or their salary information to your entire family, only to you.  

If your family is particularly touchy, they might believe that you don’t trust them.  Maintain your position and draw a firm line between family and employee.  You can still have a loving relationship in and out of work, but there is a difference in expectations and capabilities in the home versus work.  It only gets messy the more that you muddle that line, so stick to it.

Exclusion of Non-Employee Family

Start ups consume the lives of the founders to begin with, but if your family is working there, be prepared to talk about nothing else.  You will share the same work experiences and have the decades-old familiarity to support it; this takes the traditional work comradery up a couple notches.  Some of my family’s best bonding moments have happened because of our mutual dislike of a customer or distrust of another employee.  

However, this results in a certain level of exclusion of family members who do not work at the business.  They cannot share the stories of frustration or success, because they aren’t spending those extra 40 + hours a week with you.  This can be especially difficult when just opening your business, as you won’t have extra leisure time to spend with family, but make the effort to connect with them.  Talk about something other than work.  Your business might seem all-encompassing, but it is not enough to sustain a relationship with everyone in your family.

Running the Risk of the Risk-Averse

According to Harvard Business Review, family businesses tend to strategize based on the long term.  They are more concerned about the next generation and the longevity of the business, rather than turning a profit in the now.  This means that family businesses tend to be stronger in economic downturns, but they profit less in times of the plenty.  The reasoning behind this becomes obvious to anyone in a family business where there is a distinct lack of an individualist mindset.  If the company does badly, it’s not just your coworkers that you smile at in the elevator every morning, it’s your family that suffers.  Family business owners are less willing to take a risk, because that business is the livelihood of their siblings and children.

You can still get rich with a family business – look at Walmart– but it’ll be harder to see a risk worth taking.  More than likely, you’ll  be able to ride out a storm, but millionaires aren’t made by playing it safe.  

Others Will Take Advantage

This commitment to the longevity of the business manifests itself in other ways than just your business strategy.  It’ll affect the day to day, and your employees will see that you’re willing to go to any lengths to make your business thrive.  If you allow it, they will take advantage of that fact.  They will slack, figuring you will pick it up.  Do not let this become a trend.  Obviously, you signed up to have a higher level of responsibility than your employees, but that is no reason to let them walk all over you.  Set your limits and stick to them.  Reward employees that never make you ask and discipline employees who are never there when you need them.

Family can be an invaluable resource when starting your own business, but they can also be a detriment.  It’s a delicate balance but, if you can pull it off, you can provide a real opportunity for your family and yourself.  These are some of the obstacles in your path but they’re not roadblocks, more like speed bumps.  Slow down and access the line between family and employee and your life will be significantly smoother in the long run.   


Dayton socializes for a living and writes for fun.  Her rarely relevant college degree has earned her expertise in political science, writing, Spanish, rugby, debate, theater, and spreading herself too thin.

One Reply to “Guest Post: 5 Crucial Problems of Family Businesses”

  1. Family business can be stressful and rewarding. I would say use your business as a tool and not an enabler for your family. We are entering into the second industrial revolution and leading the charge into the information age. Joyfully disrupting the natural order of things and embracing the change that is “The Internet if Things”. Great blog post.

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