Starting any kind of business is difficult, but creating a commercial enterprise with the people you love can quickly turn into a nightmare. Why, though? Why is it so easy for family businesses to fall apart?
They always start with the best intentions; a shared love which is recognized as being a commercial opportunity, or the decision to join forces when one party is made redundant. Family businesses, on paper, seem like fantastic ideas and there are countless examples of successful enterprises built on that very model.
If your family business has fallen apart or is on the verge of doing so, you may find solace in the 5 most common reasons family businesses fail. One or many may be at the heart of your failure, so let’s get the business scalpel out and look a little deeper…
1. You’re doing it for the wrong reason
This is a tricky one, because it relies on total honesty from all parties. One or more of you may have entered the family business for the wrong reason. Perhaps a redundancy or rift at the day job forced you into something which appeared to offer grass of the greener variety.
Sit down and ask everyone if they 100% want to be involved with the business. The answer to your trouble may come to light very quickly.
2. Ugh… nepotism
If your family business includes non-family members and dissent amongst the ranks has been highlighted as a contributing factor to the business’s failings, you may have inadvertently created a company culture based on nepotism.
Hiring staff based on their closeness to you rather than on merit is an easy trap to fall into when running a family business. Avoid it at all costs — not matter how hard.
3. You’ve failed to separate work from personal life
‘Never take your work home’. How many times have you heard that sage advice? Now flip it around and what are you left with? A common family business issue; the inability to separate personal life from work life.
If there are pre-existing feuds within your family, they may be entering the workplace and causing untold damage. Never take your home to work.
4. You’ve forgotten the basics of business
Running a family firm can be a great deal of fun (if you happen to all get on), but if you’re having too much fun, you may forget about the basics of business.
Compiling a proper budget, understanding business rates and focussing on profitability are just some of the disparate things your family business may have overlooked. Remember – you’re business people.
5. You didn’t plan for succession
According to the Small Business Administration, 33% of family businesses fail to survive the transition from the first generation of owners to second generation ownership. Without a succession plan, how can future generations of your family ensure they pick up where you left off?
Create a plan which paints a clear path for the next generation. Forecast growth and map out the future of your products and services. Consider it a ‘will’ for your business.
6. Not enough persistence
Family businesses, when operated correctly, can be the most joyous and satisfying of commercial endeavors. They simply require business acumen and a balance between family loyalty and ruthlessness. It’s a hard thing to get right, but avoid the 5 mistakes above and you’ll have a fighting chance.