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The biggest problem facing family firms is the family

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Introduction

Issues in Small Business and Entrepreneurship: An Essay on "The biggest problem facing family firms is the family"Discuss Author: Tracy Garratt Student Number: 20059201 Tutor: John Stephens Module: IBO2006 Submission Date: January 12th 2002 Small Business and Entrepreneurship Tracy Garratt 20059201 "The biggest problem facing family firms is the family" Discuss Family businesses have been around for a long time, when craft and farm businesses were the only business in existence it was almost universal practice for them to be passed on through generations of the same family. (Bridge et al 1998,p129) Family businesses are still very popular and have a major contribution to the economy. They range in size from a small local shop to multinationals such as Mars, S.C. Johnson & Sons etc. (Timmons 1994,p283) A definition by www.entrepreneurmag.com "Think about all the quarrels you've had at the dinner table. Now bring all your squabbles and rivalries to work every day" this is a family business. The business becomes part of the family they are not two separate entities they go together and this is what can cause the problem. You can no longer leave work problems at work they are brought home. This is why there is so much extra pressure for them to succeed because the whole family are involved and have an interest in how the business is doing. ...read more.

Middle

A major problem with family members investing in the business is that they are sometimes unwilling to plow the profits back into the business for expansion and growth. (www.bizmove.com/general/m654.htm). Which is why many family businesses stay quite small in size and do not expand and take risk. The dividing up of the profits can also be a difficult affair. It can sometimes create a lot of tension in both the family and the business. When the business is first started and the family members make their investment it should be decided how the profits would be divided. Will everyone get a salary? What about sleeping partners? Etc. There are many questions that must be answered to deal with salaries and benefits but many do not deal with this until it has become a problem. This can create family relationship problems because the arguments of who gets paid more and who does the most work gets dragged into family life. Succession is one of the hardest things a family business has to deal with because effects the whole business and the family. It is a once in a lifetime decision for the leader of the business (www.entrepreneurmag.com) believes that if you "make the wrong decision, you life will be hell, your family will split, and your business will suffer greatly." This statement is a little over the top but it can have a drastic effect of the whole business and family. ...read more.

Conclusion

states that "The Chinese have developed as formula for family businesses which has turned them into strong competitors of the world stage." This may be because Chinese families have very strong family bonds and relationships and a high need to succeed. This need to succeed is drilled into each layer of the family so the leader/successor has a lot of pressure to do well. The pressure of running a family firm can be too much for one person to deal with. In conclusion although family can be a big part of the problem for family firms they are also its greatest strength. Every member of the family knows each other's strengths and weaknesses. You have a support system that knows both your home and work problems to rely on with the knowledge that they are loyal to you because they are family and you trust them. There is more of a willingness to succeed so they are self-motivated and are willing to put in the extra time and work longer hours to grow the company. Capital can be raised from each family member and they can all share the benefits. Family firms tend to stick to their values and beliefs and are thought of as trust worthy. They are also able to pass it down by generation and keep it running as a family firm so it has a sentimental value. Many of the strengths can also be turned around into weaknesses, which is why the family causes the most problems; they are both its strength and its weakness. Tracy Garratt 20059201 ...read more.

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