Seven pitfalls to avoid when running a family business

Seven pitfalls to avoid when running a family business

Learn how to separate business from personal matters.

Entrepreneurship is rarely easy. In addition, adding family in the mix can create multiple layers of complexity — barriers and challenges with which competitors may not be burdened with. That said, the unique dynamics of a family-run business can also result in extraordinary success, as evidenced by Wal-Mart Stores Inc., BMW, Ford Motor Co. and Tyson Foods Inc., which are all highly accomplished family firms.

For this reason and others, the “family business” trend is flourishing, and this holds true for the carwash industry. In fact, recent reports reveal family-owned companies comprise between 80 and 90 percent of businesses worldwide, generating a staggering estimated $6.5 trillion in annual sales — “enough to be the third largest economy in the world (behind the U.S. and China),” as cited in the report.

What is also fascinating is that the Global Family Business Index, a compilation of the largest 500 family firms around the globe intended to exemplify the economic power and relevance of family firms worldwide, found that 44 percent of these businesses are owned by fourth generation or older family members. These companies are in it for the long haul and have clearly realized the kind of sustained success needed to withstand the test of time.

One major component of long-term success among family businesses is simply knowing how to navigate and circumvent personal relationships in order to work together effectively, while also maintaining positive perceptions and overall integrity with nonrelated staffers. Achieving all of this, and tending to “standard” business issues at the same time, can be daunting and a final blow for far too many.

With this in mind, let’s take a look at seven pitfalls to avoid — all of which can cause an assortment of strife, from uncomfortable family friction to tearing a family and business apart.

Not respecting family hierarchy

Every family has a pecking order, and not respecting this order within the business can cause friction. If someone feels he or she is being disrespected or not being heard, it’s a recipe for resentment and conflict.

A certain level of mutual respect and a feeling of collaboration are essential. Leveraging each person’s individual strengths, including management capabilities, for the business’ greater good needs to be always top of mind.

Each family member should take the lead in the areas of which he or she has the most experience and/or knowledge. At times, a younger family member may be in charge of a particular project or aspect of the business; however, respect for family hierarchies within the organization must be maintained.

Neglecting to define or agree upon roles

Family members must take an active part in choosing and defining their roles within the business. Make those roles official by including titles, creating business cards and listing the positions on your website’s “About” page. This will be a motivating factor to get a family member to acknowledge his or her position.

Defining objectives is also important. These should also play into each family member’s strengths. Each quarter, family members should define one to five key objectives and goals to accomplish. This will help keep everyone in the family circle moving forward and will help maintain momentum within the company at large.

Not allowing enough leeway

Family members, especially the younger ones, need the freedom to try their own projects, even if other family members aren’t necessarily on board. If the project fails, it is a learning experience — and one they will remember for a long time. If a family member’s project is a success, it is a huge win-win for both the individual and the business as a whole.

Moreover, it is important to remember family members are not the same as regular employees, and treating them as such can be a recipe for disaster. No one is more invested in a family business than the family members are; and, because of this, they should have much more leeway and authority than other employees may have.

Not including the entire family on important decisions

For many, parents and grandparents were the go-to family members for advice and input on important decisions growing up. In business, it is also imperative to include the entire family when making major decisions for several reasons.

First, with 90 years and three generations of experience to draw upon in my own family business, not utilizing that collective wisdom and experience would be a tremendous loss in potential opportunities and a wasted resource. In your own family business, even if you do not currently have the advantage of multiple generations’ worth of wisdom to draw upon, it is important to create the expectation that everyone’s input is valuable, which it is.

Second, including any spouses can also prove invaluable. They have a stake in the business the same as any other family member and can often bring forth an “outsider’s perspective” because they may not be as close to the issues at hand. When the entire family participates and a resolution is reached, everyone takes ownership of that decision and the results, for better or worse. In this way, important business matters become family matters.

Having ‘zero tolerance’ for personal versus business finances

On the one hand, keeping business credit cards under control is a must. Misuse can put the whole business at risk of an IRS audit. On the other hand, revenue generated by the business should not be off limits. After all, that money does not belong to one person, it belongs to the entire family.

No one family member should have his or her fist so tightly around the purse strings that no one else has access to the fruits of his or her labor. This only serves to create power struggles and resentment. Having tolerance and compassion regarding family members’ financial needs is necessary.

The business exists to provide for the family. If it cannot do that, what is the point? Allowing family members to draw from business revenue when necessary makes it possible for family members to take care of their own needs, which, in turn, helps enable those family members to maintain focus on their part of the business.

Any concerns about overuse of company funds can be dealt with by drawing up and agreeing in advance to a policy regarding the personal use of revenue. No matter what a particular family dynamic is, remember that, ultimately, family is far more important than money.

Forgetting to celebrate the wins and have fun

To me, being in business with family is a blessing. If someone is not having fun running a family business, he or she may be taking it a little too seriously. Make sure to take the time to celebrate the wins, in addition to learning from the losses. This is vital to maintaining morale and a generally positive feeling toward the business.

Any time an objective or goal is reached, time should be taken to acknowledge and celebrate that accomplishment before moving on to the next. If an achievement is not commended, family members may begin to feel taken for granted or unappreciated, which can hinder morale and motivation and might even open the door for resentment. A family business that celebrates and supports one another creates a culture that fosters dedication and success.

Not having a conflict resolution plan

Business disputes happen, and when those disagreements are between family members matters inevitably become personal. To avoid conflicts spiraling out of control, make sure everyone signs an agreement that states to handle any dispute by mediation or arbitration. Litigation should never be a consideration. It will only cause irreparable damage to both the business and the family.

Proper communication is essential in any relationship, but even more so within the highly specialized context of family business dynamics. It is critical to create a system and safe place to deal with anger between family members when it arises — away from the eyes and ears of nonfamily employees —because a family-run business should be portrayed as a united front.

For co-owned family firms, have an agreement in place for touchy areas such as “veto power,” and implement processes and rules for how to move forward if the two parties don’t agree on an issue. This is imperative to avoid arguing and any internalized anger.

At the heart of avoiding each of these pitfalls are proactive communication, systemization and conflict resolution. Ultimately, how one interacts with family in general will shed light to how he or she may interact within a business.

Taking the time to consider the scenarios that may cause conflict among family members who work together and planning some precautionary measures will help entrepreneurs be well on their way to building stronger relationships with loved ones and, perhaps, a lasting family business legacy for generations to come.


  • Thomas Zellweger, “The 500 largest family firms in the world,” Global Family Business Index, Center for Family Business; University of St. Gallon.

Brian Greenberg is a multifaceted entrepreneur who has founded and now spearheads multiple online businesses. He currently co-owns and operates three entrepreneurial companies with his father, Elliott Greenberg, which have each flourished for over 10 years: Wholesale Janitorial Supply, TouchFree Concepts and True Blue Life Insurance. Brian may be reached online at

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