5 Common Family Business Issues

Leading a family business can be a complex affair. "Family" and "business" are intertwined into a mix of business challenges, family values and generational differences - meaning that the issues faced by a family business are often more diverse and complicated than those faced by other companies.

Despite these definitions, questions still remain.

  • What are the common family business issues that exist today?
  • Why do those issues need to be immediately addressed?

These questions will be answered by reading the article. You will learn more about the 5 most common family business issues and why each of them must be addressed immediately. Ceri note: the article doesn’t actually cover this. 

5 Common Family Business Issues 

1. Hostile takeover of the board of directors to the family business.

Family Business IssuesWhile most family businesses have 100% ownership in their business ventures, it can never be denied that such businesses need additional capital for growth and expansion. This means that a family business can sometimes take on outside investors in order to raise the capital required for business expansion.

Outside investors can sometimes take 51% ownership in the business leaving the remaining 49% to the family. When this happens, hostile takeover by outside investors is most likely to happen. 

2. Family business owners sometimes don't have legitimate successors. 

While the family business may be thriving, it can’t be sometimes sustained when there are no legitimate successors to take over and continue the business legacy of the family.  In other words, family businesses can sooner or later fall into the hands of outside investors or key employees who don’t have a blood relationship to the family. 

3. Division among the legitimate successors of the family business.

Family Business Issues

This happens when there are lots of legitimate successors in the family business.

If the family business owners have 5 or more children, the likelihood of disagreements in business decisions is likely to happen. They all have equal share in the ownership of the business. This means that some of the legitimate successors have to take sides when executing business decisions. This is detrimental as it will cause division in the management of the family business.

4. Arranged marriages to fortify the prestige and position of the family business can happen. 

It has occurred that children of family business owners are forced into arranged marriages so that there will be union and consolidation of wealth and connection of the two families.  This arrangement can sometimes cause a problem to the family business since the two offspring do not really love each other. The fake relationship will take its toll sooner or later in the business decisions, and the family business will be affected. 

5. Legitimate successor of the family business is not yet of legal age.

Problems can sometimes arise in the event of death of the original family business owners. This is because the legitimate successor is not yet of legal age and is not yet allowed to run the company. This can be an opportunity for someone within the family bloodline or an outside investor to take advantage and unjustly benefit from this particular event. 

Understanding Family Business Issues

Family Business Issues

Succession in a family business is perhaps the most critical challenge among the many unique challenges of family businesses. Succession can be a key moment for the survival of a family business, especially when families are unprepared, lack global perspective, or are caught up in emotional issues.

Good business schools that offer executive development programs especially for family businesses can help alleviate this risk by providing impartial expert guidance on strategies for succession in family business.

As it turns out, strategic planning for the family business takes dedication and sometimes a little help from the outside.

To make sure your family business leverages the opportunities of today, and stays strong into tomorrow, it’s wise to consider executive education designed especially for family businesses.This can provide an excellent environment to take stock of your strengths and key challenges, gain new perspectives and tap into expert guidance to develop your strategic planning for the family business

Still looking to solve family business issues?

  • The Financial Times acknowledged IMD as one of the best institutions in the world for executive education and open programs.
  • Our Leading the Family Business program is 100% committed to developing global leaders through high-impact executive education.
  • Take your career to the next level today by strengthening your existing skills and acquiring the skills you are missing.

Explore IMD's Leading the Family Business program, the world's longest-running family business program. Download the (NEW) program brochure now.

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