A family business is defined as one that has 2 or more members of the same family working for it, the business is run for the benefit of the family. Generally speaking most family business does not last longer than 25 years, or 1 generation.
There are advantages and disadvantages to working in a family business, one of the main disadvantages are; if thing go drastically wrong it can ruin a family relationship forever; there is also sibling rivalry to take into account. On a positive note family members will be loyal and have a willingness to sacrifice for the benefit of the business. For these reasons it is important the right business is selected when looking to acquire.
One of the main things that should be considered when looking to acquire a business is simply; why is the business on the market? Is it because there is a fundamental problem or are the owners simply ‘cashing out’.
How will the family business be managed? In an ideal world every family member would have an equal share, however in reality this is not practical as someone needs to have overall authority otherwise decision making could become too problematic, this is one of the factors to consider in choosing the right business.
What is the long term plans for all members of the Family? Some family members may want to retire in 10 years time others in 20, these are all worthwhile considerations.
Financial situation – This may require one member of the family providing the finances to purchase and run the business, this can also prove problematic and cause resentment, ideally all members should share the same risk, this way everyone would be working towards a common goal.
In summary a family business brings a unique set of problems, however if these problems are addressed at the beginning and the right business acquired then there is no reason why the business should not go on to be successful. What better motivation can a person have than working for a business so that one day their children become part of it in the future?
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