3 Most Common Reasons Family Businesses Fail

beggers December 31, 2017 0
3 Most Common Reasons Family Businesses Fail

Today almost everybody would give anything just to be a part of the family business. When we think about it, it sounds like a dream because it has become very hard to find decent work with a good paycheck. Even if you do find it, there are always strict monitoring, additional assignments and the fear of losing that job. When it comes to family business, it seems like it’s just waiting for you. Since it’s ruined by your family you feel protected, don’t have superiors and can work as much as you like. But is it really like that? If you look at the statistics, you’ll see that 70% of family businesses fail before the second generation takes its turn.  That is because, although everything seems under control, one thing is never under control when it comes to family – emotions. Yes, we know, everybody has a problem with emotions from time to time, but if you have a family business they can be his end.

I’m better than you!

Let’s start with simple things. And the most common part of every family is – a feud.  Every family has at least one kind of feud going on, like the rivalry between brother, sisters or (the worst) siblings. This is a completely natural and quite harmless thing – brothers or sisters will always compete to be at the top, it’s like a game to them. But running a business is not a game. The goal of their competition has shifted from ‛who is the winner of the game?’ to ‛who is the leader of the business?’. The goal has maybe shifted, but for them, it usually stays a game, until they find themselves on a shattered battlefield of bankrupt.

I know, you’re gonna ask – but where are their parents? That is the main catch – in the family business, there is no ‛parent and child’. Everyone must become equal for the fair distribution of power. So, when kids think they are ready (and they are not), there is no stopping them. Poor business decisions start coming, one after another. Like they are competing (and in some way they probably are) who will make the worst result. That’s why you need to give full control to one person.  But that leads us to the second problem.

You did that on purpose!

Okay, now you have made yourself the leader (let’s just imagine it’s you, but it doesn’t have to be) and you have achieved maximum power. We have already learned from Spiderman that ‛with great power comes a great responsibility’. But the screenwriters don’t run the family business and that’s why they forgot one more thing that comes with great power – false accusations. If you are a leader in family business your partners (so to speak) will take your every business decision personally. And that’s how you will find yourself in a mess where the phrase ‛it’s just business’ becomes completely false. Every issue will become personal. If the company is making less money and paychecks become thinner you will be accused that you did that on purpose. In these stage kids are not the biggest problem – now the parents are usually in the focus.

After the numerous ‛business’ arguments they will pull out their greatest weapon – a divorce. We all know what divorce can do to us in our home, but it can do a lot more damage inside the company. There is no family business without the family, right? That’s why experienced professionals in this field like Withstand Lawers recommend documenting everything from the start. Get everything on paper – written agreements. During the divorce couples will lie without blinking in the fight for property, what do you think they are prepared to do if the main prize is the whole company?

We can do it!

Well, this one is not so much about emotions, it is more about being too confident in yourself. Let’s just say that you have succeeded to overcome your differences and accepted that one of you will be the leader without divorce threats. You are full of positive energy and you shout with your voices like one: ‛We can do it!’. The problem is that you probably can’t. Because positive energy is not enough to run a business – you need experience. And in most cases, owners of family businesses don’t have it enough. As your business starts to grow you will face many challenges such as legal and financial issues that you won’t be able to solve on your own. The complexity of this issues can be solved only by hiring professional help. Take our advice, do go surfing the internet and looking for self-help, because these tips can be useful only (if ever) if you know what you are doing. Talk to some flesh&blood like lawyers and accountants. Just don’t make them a part of your family.

 

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