Family Business

Family Business

            A family business is a business in which one or more members of one or more families have a significant ownership interest and significant commitments toward the business’ overall well-being.

            In a family business, two or more members within the management team are drawn from the owning family. Family businesses can have owners who are not family members. Family businesses may also be managed by individuals who are not members of the family. However, family members are often involved in the operations of their family business in some capacity and, in smaller companies, usually one or more family members are the senior officers and managers. Many businesses that are now public companies were family businesses in India.

            Family participation as managers and or owners of a business can strengthen the company because family members are often loyal and dedicated to the family enterprise. However, family participation as managers and or owners of a business can present unique problems because the dynamics of the family system and the dynamics of the business systems are often not in balance.

In some countries, many of the largest publicly listed firms are family-owned. A firm is said to be family-owned if a person is the controlling shareholder; that is, a person (rather than a state, corporation, management trust, or mutual fund) can garner enough shares to assure at least 20% of the voting rights and the highest percentage of voting rights in comparison to other shareholders.
Some of the world's largest family-run-businesses are:

- Walmart (United States)

-Samsung Group (Korea)

- Tata Group (India)

Advantages to the individual

• Puts you in control of your own destiny
• An acute sense of achievement as a family
• An incentive to keep going
• Provides a certain level of freedom
• An opportunity of employment
• Can keep the family together
• Creates wealth
• Offers security
• Instills a sense of pride and belonging.

Advantages to the business

• Can be a competitive advantage
• More strategic than tactical
• Creates enthusiasm and passion
• Can enable a company to outperform
• Offers a strong corporate culture
• High staff loyalty, lower staff turnover
• Builds a family's status in the community
• Long-term corporate vision.

Disadvantages to the individual

• You can feel trapped. Might prevent you doing what you really want
• Need to be better than non-family peers
• The weight of family, peer and employee responsibility
• Can be difficult to raise liquidity
• Can tear the family apart, if not properly managed.

Disadvantages to the business

• Family businesses can be regarded as amateurish
• Non-family members may not join because they cannot reach the top
• It can be difficult to raise capital
• Senior family members may see themselves as having a job for life
• Decisions may be too emotional
• There may be a deep seated aversion to change
• It can be a struggle to continue the spirit of entrepreneurial flair.

Preparing Yourself

            Assuming that you've decided to go for it after weighing the pros and cons, you need to prepare for your multi-faceted role. You should look at your family history for clues as to what might happen and prepare for this.

            It is possible to avoid potential problems and legal disputes by taking legal steps from the start. There should be a strategy to cope with internal disputes and provide the mechanism for its modernization even against the will of some family members. Consult a lawyer for the inclusion of an exit strategy that will safeguard its long-term future.

References

Coutts. 2012. On The Advantages and Disadvantages of Being a Part of Family Business. http://www.coutts.com/private-banking/coutts-institute/family-business/coutts-forums-for-family-business-owners/highlights/advantages/ (access 27^th Sept 2012)

Pinoy.2009. Advantages and Disadvantages of Family Business. http://pinoynegosyo.blogspot.com/2009/09/advantages-and-disadvantages-of-family.html (access 27th Sept 2012)

 Ira Bryck. 2012. The Umass Family Business Center. http://www.umass.edu/fambiz/ (access 27^th Sept 2012)

 wikipedia.org...