Business Miscellaneous

Family Business. Worth the Risk? What are the Pros and Cons?

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There are a lot of different ways to run businesses. They can be public or private. Similarly, you can employ strangers or the people nearest and dearest. All of these different ways of running business have their upsides and their downsides.

Today, let’s look at one very specific kind of business. The family run business. The truth of the matter is, family run businesses are as old as they come. They existed before we even had a concept of business with parents teaching their children their skills and abilities and then roping them in later on. Family names, in many ways, show the businesses families used to run. There were a lot of smiths, for example. 

So, are they still the best way to go?

Pro: Greater incentives

When you’re working in a company that’s owned by the family, you’re not just an employee. In some sense, you’re also an owner (or, at least, you will be). What’s more, the people who work in the company are some of the most important people you have in your life and you really don’t want to let them down. 

This means that it is often far easier to motivate people to do their part and to stick in that extra bit of time even when there isn’t really that much time to pay them. In this way, when times get tough, family businesses manage to get tough with them and can often keep going for longer and with less.

Con: It’s not a meritocracy 

The best run businesses make it their priority to put the best people in the best positions. You hire and promote based on the skill set of the person. That’s harder to do in a family run business. Family, after all, expects to be promoted first – even if an outsider that you hired turns out to be better at the job than your family does.

This creates a constant tension which can cause all sorts of problems and hurt feelings if not managed carefully.

Pro: All of you know where you stand 

This point works in both directions. You know what your family is capable of and your family is more likely to know what you do. This will speed a lot of things along nicely. For example, you’ll be able to hand out assignments based on what you know people are capable of. Similarly, when a new family member enters the business chances are they’ll have a good idea of what it is you do. 

This means shorter learning curves all around. A huge advantage in many industries where training times can be expensive and profits can be tight.

Con: No home and work separation 

Families fight. That’s just the way it is. That can already be difficult enough to deal with when you only see each other on the home front. But if those arguments and problems also get taken into the office with you, that can really lead to some hard feelings. 

The more you see a certain group of people, the more likely underlying problems will bubble to the surface. Unless you can somehow manage these kinds of problems, it means there will be a lot of fights in your company. 

Pro: Free labor!

Particularly if you’re starting out with a business idea that has small margins, being able to use your children for a few hours here and a few hours there can help make sure that your business doesn’t end up going under.

Is that child labor? You bet ya! But as long as you make sure that it doesn’t demand too much of their time, they’ve still got time to write that term paper. They learn some real skills as they work and it doesn’t have to be as bad as it sounds. After all, understanding what makes a business function and what makes a business flop is a life skill more of our children should have. 

Con: All one culture

Businesses often already have the problem that they end up with people who all think alike. That’s even more likely in a family business, where people don’t just work together but have also been raised together. 

The big problem with this is that it can be hard for new ideas to be accepted. New technologies might be slow to be picked up and ways that aren’t as effective as they could be can be very hard to change. 

Pro: Tax advantages 

If you manage your cards right, you can end up paying less in taxes. This is both true if you employ people from your direct family as well as when you hand over the business from one generation to the next. 

These differences aren’t huge, of course, but they can help – particularly if you make sure that you construct your business to take advantage of them correctly. 

Con: Family can be hard to control

Some people in your family are going to be hard workers who are always in on time and do the best they can. That won’t be true of all of them, however. There are going to be situations where employees take advantage of the situation and break the rules.

In that situation you might have to take the difficult decision of firing a family member – which can lead to all sorts of problems – or keeping them despite their rule breaking – which, you guessed it, can lead to all sorts of problems. 

So, what’s the verdict? 

Look, if there was some kind of easy verdict than there would be far more of one type of company than of another. There aren’t, really. There are a lot of different ways to run a company and which way you choose ultimately depends a great deal on what kind of family you have.

So start there. Could you actually work with the people who are around you? Could they accept a situation one person lords it over the others? And do they have the (ability to learn the) skills they need? These are the real questions you need to ask yourself. Because if your family is not up to the task, then chances are a family run business simply isn’t the way to go.

About the author


Preston Felix

Preston Felix is a graphic designer, traveler and freelance writer for different publishing houses and magazines. He is passionate about covering topics on blogging, traveling, business writing and self-improvement.