Family business is big business; they are also more prevalent than you think. The government-led SME survey in 2014 revealed that 72% of businesses in the UK were family owned, whereby members of the same family own the majority of the company. This figure was up by 10% from the figures in 2012, showing that this particular area is on the rise.

Running a family business often brings different challenges that non-family businesses either don’t experience or can work around. Managing these challenges and overcoming the obstacles is vital for the business to succeed beyond the first generation where it can continue to bare fruition for the up-and-coming family talent.

With the help of Families in Business we have highlighted the 5 biggest challenges to family run companies and how overcoming them is essential for success:

  • Family Dynamics
  • Succession Planning
  • Shared Purpose/Focus
  • Communication
  • Governance

1. Family Dynamics

Just over a quarter of people state the best thing about being part of a family business is “building something” together. When things are going well it’s great, but family dynamics can also cause friction to businesses. For the majority of the time, running a family business is the same as any other SME, however, complexities can arise when, for example, your cousin is your boss, your mother-in-law is dishing out the orders or you are having your Sunday roast dinner with your employees!

These family dynamics can get in the way, the trick is to not let them, which can be easier said than done. 92% of those involved in a family business say they enjoy being part of one, which demonstrates that with the right leadership and direction, being a family can prove to be a huge business benefit. Managing such relationships in and out of the workplace can be a source of conflict, but ultimately this has to be dealt with by the leader to ensure it doesn’t hinder business.

2. Succession Planning

Succession Planning is vital to ensure a family business survives beyond the first generation. A recent survey found 97% of owners want their children to inherit the business. Without succession planning things can go pear-shaped rapidly. Identifying, developing and equipping the next generation with the skills to succeed is a major part of succession planning.

Creating a Will and making your wishes clear is just one way to plan for the future of your business. If an owner or a major shareholder suddenly keels over or has a severe accident, and there are no plans in place, it is likely to leave the business in a very vulnerable position.

3. Shared Purpose/Focus

Having a shared purpose and focus is completely necessary for any successful business. With key figureheads and staff all singing from the same hymn sheet, the prospects of success will be heavily increased. Surely, you may ask, everyone wants profitable success and longevity?

Well, this isn’t the case all the time. Let’s have a look at the facts: 56% of family run businesses don’t have a clear and agreed shared purpose for the company; 26% say the purpose is “lifestyle”; and 49% say their focus is growth with possible exit in mind. From these stats it’s clear that not everyone has the same envision.

The only way to find out the views, expectations and desires of your fellow shareholders is to have an open conversation. If everyone has a completely different purpose for their involvement, the likelihood of success is limited. It’s better to have these conversations early and iron out any potential issue. Clear vision is a critical cornerstone for a family business. Which brings us on nicely to…

4. Communication

At the heart of any successful business is communication. It’s impossible to read another’s mind, therefore views can only be aired (and solved) by conversing openly. When there’s family involved though, this can add an element of complexity. Three quarters of family business owners admit that they have communication challenges within the company and 55% say they’d rather stay silent than upset anyone!

If one shareholder wants to expand operations across the whole of the UK and the other wants to continue as a local business, and both are unaware of one another’s views, a conflict is going to occur somewhere down the line. It’s possible to be unaware of such views for years, at which point the shareholders have got in too deep and the continuation of the business is put at severe risk. Communicating effectively, working towards a common goal and making sure the rest of the employees in the firm have an understanding, is going to help massively in your business being a success.

5. Governance

This last point rather encompasses the previous four. From the beginning there needs to be a leader in charge, whom the shareholders back, who can oversee the firm and steer it in the right direction.

The challenges to a business from governance come when the shareholders are squabbling over overall power which can get in the way of what is actually healthy for the business. It’s vital to have an empowered individual at the pinnacle, from where the major responsibilities of the firm can be divided amongst the shareholders.

Changing governance is another potential source of conflict but can be managed by a combination of succession planning, shared purpose knowledge and communication.

Gorvins Solicitors has a specialist Family Business team who are experts in helping family businesses succeed and put the necessary tools in place to safeguard its future. We can assist you in planning, protecting and take great pride in understanding your business and the people in it. To speak to one of our family business lawyers, give us a call on 0161 930 5151 or send an email to

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