The Art of Running a Successful Family Business: Breaking Things Down
At its core, a family business is exactly what it sounds like: a company owned, operated, and managed by at least two people from the same family. Whether it’s parents and their children, siblings, or another family dynamic, the key element is that the management team consists of individuals who share a close familial connection.
In fact, family businesses make up between 80% and 90% of all business enterprises in North America, according to recent studies. They contribute about 64% to the country’s GDP—around $5 trillion annually. These businesses also employ approximately 60% of the workforce, highlighting their immense impact on both the economy and society.
However, as with any business, starting a family-run enterprise is no guarantee of success. Even though the foundation of trust between family members is vital, it’s not enough to ensure smooth sailing. Family businesses, just like others, face their own set of challenges. To set your business up for success, here are a few key things to keep in mind.
Building a Family Business: Key Considerations
One of the most important things to understand when running a successful family business is that not every family member necessarily belongs in the company.
This is a common trap, especially for new entrepreneurs. Many fall into the belief that every family member must play a role, particularly when it comes to bringing children or other relatives into the fold. While the intent is often well-meaning, this approach can backfire. Forcing a family member into the business can lead to a lack of genuine commitment or investment, and it could create tension down the line.
For parents hoping to bring their children into the business, it’s best to approach this situation with care. Allow them to choose whether or not they want to join—don’t make it feel like an obligation. This way, when they do become involved, they’ll be more likely to bring passion and dedication to their roles.
Moreover, not all family members may be qualified for leadership roles. It’s crucial to base decisions on experience and qualifications, not just familial ties. Elevating someone without the right experience to a high-level position can be damaging—not only for the individual but for the business itself. A role in the company should always align with a person’s strengths and abilities.
Another challenge family businesses often face is the inability to grow fast enough to support everyone. For example, if you start a business and immediately offer management roles to multiple family members—especially in the early stages—there might not be enough work or revenue to justify their salaries.
Instead, family businesses should grow strategically. As the business expands, there will be more room for new members, but this should only happen when the time is right. Bringing family members into the fold should happen as the business scales and when there’s enough work to go around.
Best Practices for Family Business Success
There are several best practices that can significantly increase the chances of success for a family-run business.
First and foremost, communication is key. Open and frequent discussions with all family members are essential. Make sure everyone is on the same page, moving toward shared goals, and fully aware of any significant decisions or challenges ahead. Keeping family members informed about the company’s trajectory ensures a cohesive and united team.
It’s also important to establish clear family values from the outset. What does your family business stand for? What are the core values you want to uphold? Before diving into business strategies, take time to reflect on how the business will affect the family in both the short and long term. What does success look like? Where do you see the business in five or ten years, and how do each of your family members envision their roles? Also, consider the long-term impact on things like taxes and succession planning.
Having these discussions early can guide decisions as the business evolves. It’s important to align not just on business goals, but on shared principles that shape the business’s identity and growth.
Respecting Each Other’s Roles and Perspectives
As the leader of a family business, it’s essential to respect every family member’s contributions. Just because someone is a relative doesn’t mean they’re there to simply take orders. They bring valuable perspectives and insights that can help the business thrive. If one of your children doesn’t want to join the family business, that’s perfectly fine—but for those who do, make sure they have the space to excel in their roles.
Encourage family members to offer their unique viewpoints, even if they don’t always align with yours. Sometimes this means letting them take on roles that you might not have initially envisioned for them, as long as they are well-suited to it. The goal is to ensure that everyone has a chance to contribute meaningfully and grow within the business.
By following these principles, you can build a legacy that lasts. A successful family business is more than just a company—it’s a lasting legacy that has the potential to be passed down through generations. And that, in the end, is the most rewarding outcome of all.
