I'm rich of my family

Pros & Cons of Running a Family Business

I have always been lucky to have relatives that I can bounce around crazy business ideas; but it struck me the other day that there are things I need to consider if I was to open a business with a cousin or even an aunt. Here are some of the pros and cons of being in business with family.

Advantages:

  1. You can present the best aspects of your family especially the values that the family hold true. The best example is family run retail shops. They always have a motto that derives quality and honesty within the same sentence. This means the founders have a sense of pride showing this values which can be considered necessary in the daily life of not only the family but also an individual.
  2. The understanding that you can leave a legacy behind, which encourages founders, especially during initial stages when faced with tremendous struggles, to carry on. This legacy ensures that descendants can challenge themselves to expand the business to new heights. The best examples of this are major corporations that started as family businesses and have managed to survive hundreds of years later.
  3. The family business is also a way to teach children the values you want to instill in them. Many entrepreneurs or even corporate executives tell stories of how they learnt important lessons about life when the family business was struggling or when they had to take odd jobs. It is necessary to expose children to hard work and even resilience so that they can appreciate success.
  4. Family members are able to improve themselves personally and professionally. This is because the challenges faced in day to day activities of the business have lessons in store and can instill patience that is needed for the business to thrive.

Disadvantages:

  1. It is easy to forget to put in place legal structures. This is because most family businesses are started when family relationships are at their best and the legal challenges come across during major conflicts.
  2. Many business owners forget to have a succession strategy or assume that their children will take over the business, which isn’t always the case.
  3. The employees are all family, and they can get complacent; and it may become impossible to maximize employee resources to full advantage.
  4. Challenge of separating personal and professional relationships may arise.
  5. Leadership challenges sometime arise, as some families assume that the responsibility falls on the oldest though it is necessary for the responsibility to fall on the one who has better management skills.
  6. The changes in family dynamics are often ignored and thus can create a vacuum, as the family member who had a particular responsibility is not able to avail themselves; and this can create conflict among those left in the business.
  7. Lack of professional mediation to ensure that disputes are resolved in an amicable manner is taken for granted as families assume that they can solve it with meetings held within the family. It can lead to financial woes that can drag on as the aggrieved family member is not satisfied with the ruling. The presence of someone neutral would allow the conflict to be resolved in a more professional manner

Family business has never been easy but it is possible for the business to thrive if the right foundation is put in place.

Are you in a family business? Please share your experience with us in the comments below. 

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Nyakio Kiruthu

 

 

Nyakio Kiruthu left the world of banking after 4years to venture into the world of business. She is a shareholder of Thayu Farm hotel, a family business. She holds a degree in Economics and Masters in International Business which enables her to explore the world of business through a unique perspective.

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.


5 Rules for Working with Relatives

Early last year, a Kenyan Bank invited me for a forum for SME’s who bank with them. It was great meeting different people and listening to different insights of how business is for them. The trainer gave us a case study of a fictional company which was run by a lady who hired her brother in-law as the accountant. Unfortunately for her, the brother in-law kept stealing even after forgiving him over and over again. This was a hot topic of discussion because different entrepreneurs have had extreme positives experiences with relatives, while others had negative experiences with these same family members. It got me wondering whether there are ways to work with a family member who will not compromise family relations or affect the business negatively.

The reasons why business persons do work with family members are that you can trust the person as you have known them for a long period of time, thus you are aware of their positive and negative attributes; and he team work may be reinforced especially if they feel part of the ownership of the company.

Entrepreneurs shy away from working with relatives because:

  • They may not draw the line between family and business relationship. They may not realise that a simple act of calling you by your nick name e.g. Mama James instead of Mrs. Kamau or even mannerism of being at home could be disrespectful to you.
  • The other issue is that they may anticipate better treatment or even think they can get away with performing a misconduct.
  • Disputes with relatives in the business can spill into family dynamics; one example is discipline or firing them.

It is important to follow these five rules once you hire your relatives:

  1. You must separate how one relate in the business and in the family: it is important for the business person on the first day to explain their views on how they expect to be addressed and what kind of role they are to play at work.
  2. Roles and responsibilities for family and non family members need to be stated clearly:  it is essential as you do not want to create political fractions or have disgruntled employees as they may see a clear sign of nepotism.
  3. Do not create two classes between family members and non family members: this can de-motivate good employees and can hurt business in the long run.
  4. Communicate openly with all employees: Miscommunication can lead to disputes occurring where dialogue was necessary. It is important for non employees to know that you are family members because if it is kept as a secret and they find out, it might be seen as a sign of mistrust. By ensuring good communication, you are also able to handle disputes with family members in a rational manner.
  5. Separate family decisions with business decisions: we can have decisions in a family that you may differ on and it is important to keep it separate from the work space.

It is important to set basic ground rules for working with family members as they need a chance to prove themselves especially if they are qualified.

What rules do you live by while working with a relative? Please share with us in the comments below.

________________________________________________________________________

Nyakio Kiruthu

 

Nyakio Kiruthu left the world of banking after 4years to venture into the world of business. She is a shareholder of Thayu Farm hotel, a family business. She holds a degree in Economics and Masters in International Business which enables her to explore the world of business through a unique perspective.

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.