What leads to the collapse of the family business

Olga Nagornyuk

What leads to the collapse of the family business?

The advantages of family business are obvious. Personal interest in the prosperity of the family business allows you to count on the full commitment of its founders and, consequently, on a successful result. Then why, of the three family enterprises, only one survives? The reason for the collapse most often becomes the inability of the founders of the company at the stage of its formation to distinguish between family and business relations.

Conditions for creating a successful family business

The family business, with all its specificity, is built and developed in accordance with the general laws of market relations. The success of a family business depends on the observance of four rules:
1. An objective preliminary assessment of the potential. At the initial stage, it is necessary to answer the question of what the future enterprise will do. A business idea is not born out of thin air. In the case of a family business, it should be based on the knowledge and skills of the relatives involved in the creation of a new company.
If the father is interested in photography, the son is well versed in the work of graphic editors, and the mother is an accountant, it would be wise for them to open a photo studio. When the spouse is a lawyer by education, and the spouse is an economist, it is logical to establish a company that provides services for the economic and legal support of enterprises. Families who have land and know all about its cultivation should think about the organization of sales of fresh and canned vegetables.

On the ideas of family business, read the article "Profitable business for a small town

Business woman with her daughter

2. An objective assessment of staff. Think about which of the relatives should build a business. Choose those who are able to separate personal and business relationships, whom you can rely on in difficult times and whose professional skills deserve high praise. Each manager wants to see in his employees such qualities as responsibility, discipline, readiness to work for the result. From the same position, evaluate the family members, and only then decide whether you want to see them in your team.

3. Drawing up a competent business plan based on marketing research.At the same time, you will find out what resources (premises, equipment, personnel) are necessary for the implementation of your ideas.

4. Development of the optimal structure of the company and development of criteria for building relationships within it. For a family enterprise, this is a matter of principle, so we will focus on it in more detail.

Family business rules

The authority of the leader must be indisputable. The rule "boss - subordinate" applies to everyone, regardless of the degree of kinship.

Authority of the authorities
To avoid conflicts related to the maintenance and exit of business, experts advise:

  • Develop a charter company. The powers of the director are prescribed in it and the equity participation of family members who invest in the statutory fund is recorded in writing. In case of a shareholder’s withdrawal from the founders, it will be easier for you to resolve the issue of reimbursement of the participant’s share.
  • From the very beginning to build a clear vertical of power. Violation of subordination is unacceptable. The word of the director in controversial issues is decisive, all team members are obliged to understand and accept this.
  • Establish a clear boundary between business and home: family quarrels should not affect work,as well as business conflicts - on family relationships.
  • Clearly delineate and document the duties and powers of employees. Job descriptions were invented for good reason: they delineate the circle of activity of the employee, thereby excluding interference in matters not within his competence. Differentiate the scope of authority: determine who will have to deal with financial issues, who should be charged with sales duties, and whom - to entrust financial statements.

If you do everything right, the procurement uncle will not have legal grounds to control the work of the niece who serves as an advertiser, and she will not interfere in the affairs of the brother who provides transportation. Everyone should do his own thing, life experience, alas, does not replace professional skills.

  • Hold regular meetings to brainstorm and solve accumulated issues. This rule helps all team members to keep abreast of recent events, make informed decisions and emphasizes the importance of the contribution of each of the participants to the development of the company.


  • When recruiting staff, be guided solely by the criteria of professionalism. Familyhood hurts business.

You can not hire a person just because you have a cousin. It is better to take a third-party employee who is not one of your relatives, but who has the appropriate education and experience.

  • To monitor the observance of labor discipline, without making concessions to relatives. Connivance towards some causes a natural indignation of others. The result will be a conflict. Consider whether you need employees who are not in place during working hours.


  • To develop and strictly implement the program of motivation of staff. Give out material rewards based on real achievements, and not on the principle of "not to offend your relatives." Honesty and consistency in questions of bonuses will prevent the emergence of quarrels among relatives and will keep professionals who are not part of your family, but in which you are vitally interested.
  • Wherever possible, resort to privacy. Different levels of wages and commissions are the subject of envy, and unnecessary conflicts at work and in the family are useless. Avoid publicity in financial matters, but do not go too far, putting the neck "secret" for everything. Such behavior will inevitably cause suspicion and unnecessary questions.
  • Select a successor in advance. They do not have to be a daughter or son, who may be unable to either refuse to shoulder the burden of responsibility for the family business. Choose a worthy person who will continue the work begun, bring up a good leader from him, gradually transferring your experience and imparting managerial skills. When it is time to retire, you will officially give him management of the enterprise, avoiding the division of capital and saving the business. If the owner of Adidas had once provided such an opportunity, the sons Rudolph and Adolph Dassler would not divide the company into two less powerful and large ones.
  • Consider the possibility of withdrawing from the founders of partner partners. Such events should cause a minimum damage to the business, so try not to spoil the relationship and have ready the best options for parting with former co-owners.

Fight for currency

These include: buying your partner’s stake, selling the entire enterprise to a third party, or adding the former co-founder of management functions while retaining its share.

Why family business fails

Mistakes that can ruin a family business:

  • Transfer to the business of personal relationships. There should be no favorites based on kinship or privileges based on family ties. Until you learn to share work and family, do not even think about starting your own business.

Conflict at work

  • Using rewards as a way of parental control. The only criterion for calculating salaries and bonuses (and the children of the founders is not an exception) is the level of professionalism. To pay a salary to a son or daughter only for the fact that he / she appears from time to time in the workplace is stupid and short-sighted. Do not assign your inexperienced children to senior positions. Let them start from low positions, learn business from the inside and deserve a promotion.
  • Smoothing of guilt to relatives with premiums. Having done this once, you will create a precedent, after which all other relatives will have reason to demand the same. Do not let yourself be manipulated.
  • Unlimited access for all employees to finance (in the case of small private enterprises). Money must be concentrated in the same hands, otherwise you will not be able to control the budget and easily burn.
  • Disciplinary concessions. The internal routine of the enterprise is required for all.Without demanding compliance with relatives, you provoke outrage of other employees and get a sharp decline in labor discipline.

When it comes to family business, turning an idea into a business is not enough. Organize the work of the company so that a crack in the relationship does not affect the stability of the enterprise.

Take it to yourself, tell your friends!
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  • What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

    What leads to the collapse of the family business

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