Jul . 2018

What are the Key Challenges for Family Businesses?

24.July.2018 Florence KANAAN tags: Work , Family , Business , Family Business

Family businesses are mainly the quiet success of the economy of every country in the world. In 2014, Forbes published an article entitled, “The Biggest Myth About Family Businesses” showing that approximately 35 percent of Fortune 500 companies are family-controlled and represent the full range of American companies from small business to major corporations.  In addition, family businesses account for 50 percent of U.S. GDP , generate 60 percent of the country's employment, and account for 78 percent of all new job creation. Moreover, the greatest part of America's wealth lies with family-owned businesses.


However, family businesses face many challenges of their own that make survival beyond the second generation the exception rather than the rule.


Below are some challenges faced by family businesses.



Family businesses are reluctant when it comes to hiring Executives from Outside the Family

Normally, family businesses prefer to give the priority of executive positions, especially in the early years, to family members rather than to strangers. Nevertheless, sometimes it may be necessary to bring someone from the outside, especially when the business is in crisis, or facing a transition, or adopting a new technology that no family member has the skill to achieve.


Family businesses have a lack of Succession Planning

This is frequently the main reason for the failure of family businesses. Usually, the founder spends all of his time and energy working to build the company, and forgets to prepare for a successor. Then, when this founder becomes unable to manage, the control of the business will go to a son or a daughter who is not prepared at all or not suited to run the business.


Family businesses fail to Embrace Innovation

Family businesses tend to be slower and more reluctant than other companies are when it comes to adopting new technologies or applying new methodologies. Many times, family members are afraid to change the successful formula established by the founder. In today’s business and rapid evolution of technology, rigidity, which was considered a virtue in the past, may play a big role in the letdown of family businesses.


Family businesses may face many interior Conflicts

Family businesses experience unique conflicts between their members (between individuals or between branches of the family), which can lead to the fragmentation of the business.  It can generate from rivalry between siblings, intergenerational animosity, or even a marital dispute. Unfortunately, it may be very difficult to resolve such family disputes.


Family businesses have a Lack of Long-Term Strategic Planning

Usually, the first and second generations implement a business model that turns out to be successful and that is then viewed as an invariable blueprint. The members of the next generations will be brought up with this model and will face difficulties when planning important changes. Unfortunately, any business model needs to be adjusted over time to adapt to changing consumer preferences, new competitors, evolving market conditions, and other real-world developments.


Family businesses do not have the Founder's Vision and Determination

The founders of any successful family business are usually extraordinary individuals who have both a singular vision and the determination needed to achieve that vision. However, their successors are not like them: They do not have the same skills or determination. Therefore, when the founder is no longer able to manage, many family businesses begin to decline.



Family businesses managers and advisors should prepare themselves to deal with each of these challenges. While the resulting problems may appear difficult, there are always solutions….