The plight of the Lewis brothers is one more negative example about the dangers of mixing business and blood. Last weekend, I went to the Legal Sea Foods restaurant located in Prudential. To be honest, I could hardly connect it with the most popular restaurant at one time. Undoubtedly, legal Sea Foods restaurant is another victim of family business.
I don’t denying the strengths of family business. For instance, some successful family businesses have competitive advantages, create great enthusiasm and passion, own high staff loyalty and lower staff turnover. Nevertheless, so many cases about disagreements over the family business leading to families’ separation and corporations’ bankruptcy warn us it’s a tough job to run a family business well.
Just imagine that live with a good friend or roommate in college, it doesn’t mean that we should get along in close quarters even we are in a good relationship. Same argument, we won’t really know whether we get along with our relatives who we can tell anything with each other during the regular time as business partners until we are actually running the business.
As far as I concerned, there are several disadvantages to the family business. One great thing is the role changing between the family and employee. It is unquestionable that each family member behaves in a particular role in the family and has been so used to it. However, in the family business, they have to change to behave in their roles exactly as they would in a traditional office setting. An employee-daughter can not be asking a CEO-dad to "take care of" this or that because she has a softball game that afternoon. Besides, it is easy to increase conflict between active and non-active siblings and other relatives if some family members can’t change their roles as soon as possible. These contradictions are likely to cause a struggle to continue the spirit of entrepreneurial flair, even force company into bankruptcy because of the poor and undisciplined management.
Another point worth mentioning is that it can be difficult to raise liquidity. For instance, some non-active senior family members may see themselves as having a job for life, directly influencing the overall work efficiency and operating mechanism. Besides, buy/sell agreements protect the company and its stock. For example, against a shareholder getting divorced and giving an ex-spouse an ownership stake, where the stock must go in case of death, what must happen to the stock in the event of a shareholder declaring personal bankruptcy. Sometimes, a shareholder just wishes to have control of his or her own investments and opts out of the family business while some outstanding non-family members may not join because they cannot reach the top.
In addition -- the risks of ownership. As a saying goes, there are not permanent friends, but permanent profits. As time goes by, business management and family members’ relations may have a subtle change. Brotherly love disintegrated into sibling rivalry due to the profits. So many recent local history of family business fallouts lend the strongest support to my convincing conclusion.
So my advice is taking the time to work out all the details before starting family business and making sure all family parties participated in business are aware of the unique risks and rewards associated with family business.
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