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4 types of disputes that can derail family-run businesses

| May 25, 2020 | Uncategorized

There are numerous benefits to running a family business, from providing security and opportunity for loved ones to having professional flexibility and freedom.

However, there are challenges for every new business owner. They must get the business up and running and navigate the complexities of business operations. Add in a family element, and the potential for challenges to arise can increase. Anticipating these challenges can help you avoid them and keep your business on track.

Some of the more common sources of disputes among new business owners and family members stem from the following issues:

  1. Paying someone who is not contributing – You may start by paying everyone who contributes, but over time, family member participation can wane. If you continue paying someone who is not working or making contributions to the business, other people can get angry. Prevent these disputes by creating official roles and job descriptions to support compensation.
  2. Treating family and non-family employees differently – Giving preference to family members can create a sharp divide between family employees and non-family employees. Avoid this by holding everyone accountable to the same expectations and being consistent with rewards and punishments.
  3. Failing to put agreements in writing – It can be easy to rely on handshakes and verbal promises when starting a business, particularly when the other person is a trusted family member. However, these agreements can be unenforceable. Treating family agreements just like professional partnerships can prevent these complications.
  4. Rejecting outside input – Working with family can be isolating, and you can lose valuable perspective on complicated issues. As such, when personal dynamics, emotions and business collide, it can help to speak to someone on the outside for an objective assessment of a situation. This person could be a lawyer or mediator with experience navigating family business matters.

These disagreements and missteps can derail family business operations and strain relationships, both personal and professional. This can be especially true when the business is still in its infancy. However, being aware of them can make it easier to address them before they ever become an issue.

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