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Pros and Cons of Running a “Family Business”

Updated on August 30th, 2021
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Your dream of running a business might include an image of your family working beside you.

But if you decide to try and turn that dream into a reality, it isn’t necessarily going to be all rainbows and sunshine.

Although many family businesses continue to succeed and thrive, even long time family owned business have problems.

The truth is that there are both pros and cons of running a family business. Here are some things you should know before you attempt it.

Pros of Running a Family Business:

Greater Incentive to Work Hard

One of the possible benefits of running a family business is that family members may work harder than they would if they were working somewhere else. In other words, it could help you ensure the success of your business. This is because they have a vested interest in the success of that business.

Tax Advantages

If your family business includes your under-aged children there can be some tax advantages to hiring them in the business. But you will want to be careful to make sure they are not being paid for work not done. Good documentation is critical.

Furthermore, if you know you will be passing the business on to your children in the event of your death, there are          additional effects to consider. You would be wise to consult a lawyer ahead of time to ensure everything is handled properly from the beginning.

You Know What You’re Getting

When you involve family member in the running of a business, you already know what their personalities are as well as their work ethic. You run less risk of hiring someone who interviewed well but then doesn’t perform up to expectations on the job.

Shorter Learning Curve

Having had family members around your business before you bring them in as an employee can be an added bonus. They are most likely already somewhat familiar with the business which can decrease the amount of time you need to spend getting them up to speed. What this adds up to is a savings in training costs for your business.

Work Schedules Can Be Adjusted

Another benefit of running a family business is that you can sometimes cover for each other when the need arises.

Let’s say you need to be away for an appointment or a child’s activity at school. Someone else in the family might be more willing to step up and do what is needed while you are away than if it were just another employee. As a family, you have the ability to cover each other when unforeseen events come up too.

More Relaxed Environment

As long as there are no major family conflicts it can be relaxing to work with family over other people. You don’t have to take the time to get to know each other and figure out likes and dislikes because you already know each employee well.

Saves Time and Money

When you aren’t hiring outside the family it saves time and money for the business. You don’t have to spend time and money advertising and interviewing. Additionally, as I already mentioned, training time can be decreased.

Decision Making Might Be Easier

In a family run business there can be less office politics involved. When decisions must be made it can be easier to get the job done than going through the channels of a traditional business.

Cons of Running a Family Business:

Family Can Be Distracting

Petty family disagreements can pull your focus away from running your business. It could be harder to concentrate on the details that matter, such as what your customers want or how to improve your products or services when you run a family business.

Hard to Separate Work and Home

When you work closely with your family, you may find you bring work home and then take family issues to work with you. If you are having any kind of disagreement with your spouse or family it can bleed over into your business and drive customers away. Additionally, some people need the separation of work from family.

Your Business Could Be More Vulnerable

In the event of a divorce, if your spouse works in your business, you could end losing all or part of it during the divorce proceedings. Of course, there are ways to protect yourself and your business. However, you should consider carefully all of the complications that could arise from running a family business before you involve them in business dealings.

They May Break the Rules

One of the risks you take in hiring family members in your business is that they may break the rules and think it is ok. It’s possible they might not be doing it consciously. Or, they might do it knowing that since they are family you are less likely to fire them. Either way they take advantage of the fact that they aren’t just employees but also family and have special rights other employees don’t have.

Causes Hard Feeling with Other Staff

There needs to be consequences when family members break the rules. If not, other staff members could begin to build up resentment. Promotions and raises should be documented and deserved. Infractions should be dealt with just as fairly and swiftly as with other employees.

Lack Skills for the Position

You may feel you must hire family member to work in the business even if they do not have the right skill set for the job. In direct contract to saving your business some money by hiring family this will cost your business both time and money. It could even spell disaster for your family run business and run it into eventual ruin.

Too Many Chiefs

If your family run business does not clearly define who is in-charge it could spell disaster. When everyone feels they have equal footing and you have too many bosses and opinions, how do other staff members know who to listen to? What if two different bosses give two different, directly oppositional sets of instructions to another non-family employee? These issues must be ironed out if the family business is to be run successfully.

Negative Feedback Not Taken Well

If you have to give out a criticism or correction to a family member it can cause strife in the workplace of a family run business. Negative job performance feedback can be taken too personally. That could impact the entire family unit since everyone already shares such close emotional ties. In addition, feedback could be dishonest if the family member sharing it is trying not to hurt the receiver’s feelings.

Promotions May Be Hard to Get

Sometimes when you own and run a family business you tend to be harder on your family members than other staff. This could cause you to be less likely to give out promotions to family member and more likely to pass them over in favor of other employees.

Stale Ideas

Agreeing is great, but when you really need a fresh perspective it can be harder to get when you work closely with family. Because you are all family, you may be more like to think alike or not speak up for fear of offending someone. Having some employees who are not family members and listening to their input can help.

You can run a family owned business, but keep in mind the pros and cons of running a family business before you decide to make it a reality.

Kayla Sloan

Kayla Sloan

Kayla is passionate about helping people get their finances in order so they can pursue a life of freedom. She quit her job to work for herself with over $148,000 of debt and swears it was the best decision she's ever made!

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