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6 Common mistakes made in a family run business

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Family-run businesses contribute millions to the UK economy each year, with them accounting for two-thirds of UK private sector businesses alone (source: Institute for Family Business).

For a family-run business to bring desired success, an awful lot of thought and planning needs to be put in before it becomes fully operational to minimise the chances of it failing.

There are several common mistakes that many family businesses tend to make when running a business.

1. Employing wider family members into created positions rather than recruiting people who possess the necessary skills & experience the business needs.

2. Unconsciously creating the perception that family members and close friends get special treatment compared to non family employees.

3. Not being ambitious enough - considering the business to be a big fish in a small pond rather than a small player in a massive market.

4. Drawing upon family and ‘friends of family’ to undertake key advisory positions - accountancy, training, web site development, legal, insurance etc rather than seeking out the very best person to do the job.

5. Being too kind to family members.

6. Drawing too heavily on the business - beyond what it can sustain.

Whilst it can often be difficult to implement, in practice, ensuring emotion does not dilute logical thinking is very much the key. As a business owner there is always a commitment and reliance on staff, suppliers, advisors, customers, clients and service providers but it is essential everyone is dealt with consistently, fairly and with respect.

It is often all too easy to slot family members or friends of the family into roles in this cycle that can have a significant impact on the success of the business. Being mindful of the possible outcomes of certain decisions is the domain of the wise business owner. The fix is very much along the lines of:

  • Any staff appointment needs to be against an identified need and the existence of the vacancy made known to all within the business - transparency. It is often a good idea to include a few trusted comrades in the selection process for it to be seen as transparent as possible.
  • Be mindful of how people feel. Conducting a staff engagement survey, at least annually, but ideally more frequently, will reflect any changing views of those within the business. The results will provide you with a catalyst to act.
  • Build a strategic growth plan with independent support and requisite actions and follow through on it. The selection of those with whom the business transacts needs to be the best possible people to add value and help the business progress. All too often those who you are familiar with do not deliver at top of their game.

Family owned businesses can be too soft when it comes to dealing with staff indiscretions and collecting monies due. Staff are also generally given the benefit of the doubt and this can occasionally come back to haunt the business owner, especially in the litigative society we now sit within. Understanding what profit or surplus funds are available is crucial, and if you are employing family members it's far tougher to move them on if there is a dip in fortunes.

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