Can Family-Run Businesses Work? Here are the Pros and Cons

By Alex Perdikis

You have a great business idea but you don’t want to start up alone. Your brother, sister, father, mother or second cousin on your dad’s side has experience in the field. Why not do it together? Who knows, your business may be the next Mars or S.C. Johnson & Son.

Or not.

The pitfalls of starting and running a family business are many. You could end up losing the business as well as the relationship you have.

Does that mean you can’t do it? No. But it does mean you have to plan and prepare long before you actually start up. Here’s how.

Define Areas of Expertise

“Too many chefs spoil the soup” is not just a meaningless saying. Entrepreneurs and small-business owners have to wear a variety of different hats. But when two or more people are involved, the hats can quickly become a hot mess.

“From the very beginning, it’s essential to define the areas of expertise each principal has and align those areas with responsibility.”
—Alex Perdikis

Let each owner manage his or her own area. That’s not to say you don’t have a clue about what the other person is doing, but it’s making sure everyone has an area to manage that matches their skills.

Don’t Just Communicate — Plan to Communicate

Even as each principal has an area to manage and focus on, each owner should have extensive knowledge of what’s going on in the entire enterprise. If someone became ill or unable to continue in the business, someone would have to step in immediately to avoid slowdowns or complete breakdowns. Informal communication is great, but plan times frequently where all participating family members meet together and provide updates.

In addition, everyone should provide a paper trail of business transactions and spending. A central office or filing system is mandatory.

Obtain Legal Help to Structure the Business

You probably don’t want to hear it, but you need to get help from a qualified attorney to define the structure and responsibilities. An attorney not only outlines who owns what, but what happens if someone dies, becomes ill or wants out.

Leave Work at Work

It’s easy to turn holiday gatherings or other family get-togethers into a bore for other members of the family. Make it a rule to never discuss the business outside of work. Just don’t do it.

Take Care of Your Nonfamily Employees

You’d be surprised at the number of horror stories there are about working for a family-run business. It’s not easy working in a place where everyone else seems to be related. If you want to keep your employees happy, you need to treat them with respect and figure out ways to make them as passionate about your business as you are.

Jayco CEO, Derald Bontrager, says one way to make nonfamily employees feel valued is to redefine what family means. Consider your staff to be family, too. Promote nonfamily employees. Give them the means to grow their skills and move up in the company.

If your family-run business defines the rules from the outset, promotes communication and values the staff, you’re on the right path toward success.

Alex Perdikis, Koons of Silver Spring general manager and owner, lives in Chevy Chase with his wife and daughters.