Family businesses are incredibly common. According to one report, almost 77% of small businesses can fit into this category. Even some major corporations have a single family at the top of the executive board, Wal-Mart, for instance, is owned by the Waltons.
However, it’s rare for family businesses to get this large. The vast majority of them won’t make it through more than a generation or two. Why is it that small businesses tend to fail, and is there anything business owners can do to avoid it?
They don’t have a succession plan
One possible reason for this failure is when the business owner doesn’t do any succession planning in advance. Maybe they just leave their oldest child the business in their will. With no training or experience, it is very unlikely that this child will be able to continue sustaining the success that the older generation enjoyed. Drafting a succession plan – and executing it properly – drastically increases the odds that the company will thrive.
Disputes between family members
Another common reason for failure is just when there is a family feud at some level. For instance, maybe family members think they should all be equally involved in the business, so they continually get into fights over ownership percentages, roles and responsibilities, or decision-making abilities. Instead of putting their energy into helping the business be successful, they get caught up bickering with one another.
As you can see, one of the best ways to avoid these issues is just to plan in advance. This helps to ensure that all family members are on the same page and limits disputes. Business owners should know what steps to take when setting up their succession plans.