Family and business are two cornerstones of life. So, naturally, family businesses play an integral role in local and global communities and economies—yet many struggle to maintain their legacy across generations despite a strong desire for succession.
Though family businesses account for 87% of all business tax returns in the U.S., only 30% survive to the second generation, 12-13% into the third, and a dismal 3% operate into or past the fourth generation.
It begs the question: If business and family are so important, then why is it so challenging for family businesses to stay together and persist?
Is it a good idea to mix family and business?
Don’t let the “30-13-3” rule discourage you from putting in effort. The chance of succession seems bleak if you only look at the statistics. But believe me when I say that many family businesses do, in fact, thrive.
Their secret? They keep the business affairs separate from the family affairs but pull from their core family values to create a unified purpose. When handled with care and intent, the personal aspects of mixing business and family become a strength rather than a detriment.
Nurturing a strong business and family relationship
Working with family can be as frustrating as it is rewarding. All too often, Bhaj has seen the effects of family discord on business. The trick is to keep them separate but recognize that both the family tree and the business branch require attentive care via watering and nutrients.
Essential tips for running a business with family
-
-
- Prioritize real communication – For a family business to operate effectively, business and family members must engage in open and transparent communication focused on finding resolutions rather than victories.
- Follow your north star – Successful family businesses tend to follow the lead of a key family member (or several) who personifies the company’s core values and purpose. Harvard Business Review found a 95% overlap in the language used by different members (family and otherwise) to describe their corporate ethos.
- Look to the future – Strong leaders in legacy families and businesses strategize for the long-term (e.g., generational instead of quarterly). They understand that their role will eventually end, and in order to keep the business and family running, they will have to equip their successors with the right information and tools for success.
-
According to experts, family business conflict is one of the greatest continuity challenges.
How can conflict in family business be resolved?
All families have their disagreements. And if you fail to address upwelling personal issues, they will inevitably bleed into business matters. Navigating conflict in both the business and family environments is more than helpful—it’s powerful.
Core issues that cause conflict in a family business:
-
-
- Alignment in regards to the direction or future strategy of the company.
- Performance standards for family members.
- Breaks in communication and assumptions of responsibility.
- Identification of roles with open expression/input.
- Imbalance in motivation or motivating factors.
- Details of succession; who are the future leaders?
-
According to the 2023 PwC Family Business Survey, nearly half of firms argue about future direction, over 81% don’t have conflict resolution mechanisms, and only 34% of family businesses have a “robust, documented, and communicated” succession plan.
Strengthen the family and the business with a unified purpose!
As I mentioned earlier, business and family conflicts are unavoidable. You simply can’t always agree. However, it is easier to work through those moments if all family members are reading the same general book, even if they aren’t always on the same page. You need guiding principles to ground them; mutual respect for common goals will help them overcome stubborn obstacles.
To learn more about how having a unified purpose can help the family business succeed, check out Bhaj’s blog article, The Power of a Unified Purpose.
Common Questions About Business and Family
What is the common reason for conflict in family business?
Failed communication and succession planning are the two most common sources of conflict in family businesses. Don’t wait for them to become an issue. Anticipate and plan ahead with procedural outlines for both business and family.
How to deal with toxic family business?
Toxic relationships between family members will eventually infect the family business. Business troubles often stem from family conflict, no matter how hard you try to separate them. Addressing personal relationships first will help heal even the most persistent toxic family business traits.
If you want more guidance in healing family relationships and navigating the line between business and family, contact F&S expert Bhaj Townsend via email at bhaj@focuasandsustain.com.
Sources/Additional Reading
Cover image: Family business by Nick Youngson CC BY-SA 3.0 Pix4free
