Why Most Family Businesses Don’t Work

I love all contracting businesses, but I’m particularly fond of family businesses. After all, I was the 3rd generation at my family’s plumbing, heating and cooling business. And I’ve been coaching many family-owned contracting businesses for the past 15 years.

Challenges in a family business

Here are just a few of the troubling challenges I see in many family businesses:

The owners can never stop working because there’s no real business that can run without them. This is particularly problematic when the owners want to sell the business to the kids because all that does is put a ball and chain on the next generation.

The owners give the business to the kids too cheap or with no objective benchmarks so they end up having to come back and (hopefully) rescue things.

Get organized

What can you do about this and other challenges? The very first place to start is with an organizational chart that spells out all the boxes it takes to run your company — even if your name is in every box. This org chart is helpful to any company, but it’s even more important to a business filled with family members.

Next is to create a Master Project list of projects and habits that need to be put in place to make the company better.

The Master Project list then gets whittled down to a Top 30 list of projects and habits using these two filters:

1.) The project will either fix the biggest problem or challenge or

2.) Give the company the greatest chance to grow and be profitable in the coming year.  

Finally, the Top 30 project list gets whittled down again using the same two filters to until you have a Top Five project list that is agreed upon by the whole family. Going through this process helps to focus the family on accomplishing the same things to mutual benefit.

Where else do family businesses struggle?

Family businesses often lack objective benchmarks like manuals that spell out whether a family member is or isn’t doing their job. Without that, all the family dynamics run rampant. Either there’s a golden child who can’t do any wrong or a child that can never meet the unrealistic parental expectations.

Most also lack the necessary planning for what I call the 5Ds:

Death (people die)

Divorce (either a person’s divorce at home or you don’t want to work together anymore)

Disability (people get hurt)

Debt (personal debt or company debt)

Disaster (in the service area or company)

So what happens if you get all of this handled? You can actually go to family parties and enjoy one another’s company and a whole lot more!

For more insights on how to run your family business better check out my 3-Part podcast mini-series with Matt Jones of The Site Shed on “Why Family Businesses Don’t Work and How The 7-Power Contractor Approach Can Help.”

What you’ll learn in this series is that family businesses can be a great thing — not just something you have to put up with. You can build family wealth that serves both the new and the older generations. Also, it doesn’t have to be so confrontational...it’s okay to not all work together!

Episode TSS061: Implementing an Org Chart

Episode TSS 063: Defining Roles

Episode TSS 064: Steering the Ship