Family-run businesses

Advantages and disadvantages of family businesses


If you start or join a family business, as a family member you're likely to benefit from a range of advantages which you often don't find in other enterprises. On the other hand, you may also face some difficulties that specifically relate to family businesses.

Advantages of family businesses

  1. Common values - you and your family are likely to share the same ethos and beliefs on how things should be done. This will give you an extra sense of purpose and pride - and a competitive edge for your business.
  2. Strong commitment - building a lasting family enterprise means you're more likely to put in the extra hours and effort needed to make it a success. Your family is more likely to understand that you need to take a more flexible approach to your working hours.
  3. Loyalty - strong personal bonds mean you and family members are likely to stick together in hard times and show the determination needed for business success.
  4. Stability - knowing you're building for future generations encourages the long-term thinking needed for growth and success - though it can also produce a potentially damaging inability to react to change.
  5. Decreased costs - family members may be more willing to make financial sacrifices for the sake of the business. For example, accepting lower pay than they would get elsewhere to help the business in the longer term, or deferring wages during a cashflow crisis. You may also find you don't need employers' liability insurance if you only employ close family members.

Disadvantages of family businesses

  1. Lack of skills or experience - some family businesses will appoint family members into roles that they do not have the skills or training for. This can have a negative effect on the success of the business and lead to a stressful working environment.
  2. Family conflict - conflict can arise in any business, but it's important to consider that disputes within a family business can become personal as the staff are working with the people closest to them. Bad feelings and resentment could destabilise the business' operations and put your family relations at risk.
  3. Favouritism - can you be objective when promoting staff and only promote the best person for the job whether they are a relative or not? It is important to make business decisions for business reasons, rather than personal ones. This can sometimes be difficult if family members are involved.
  4. Succession planning - many family business owners may find it difficult to decide who will be in charge of the business if they were to step down. The leader must determine objectively who can best take the business forward and aim to reduce the potential for future conflict - this can be a daunting decision.

For further information see employing family members.