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bigstock-Beautiful-Family-Enjoying-208517327 Deadly sins of family businesses

Starting and owning a family business may be one of the most fulfilling decisions you ever make – both financially and emotionally. Not only can you create financial stability for your family during uncertain times, but also personal satisfaction, rewards, recognition of your family name and improved quality of work life.

According to a Family Business Australia report recently highlighted by CCIQ, family owned small businesses make up the backbone of the Australian economy – accounting for 70% of all businesses countrywide. However, only a fraction of these family-owned endeavours make it to the second generation – and even less carry on to the third and fourth generations. If you are serious about the longevity of your family business, be aware of these 7 biggest mistakes and how to avoid them.

  1. No Separation of Business and Home Life

It may be tempting to talk shop 24/7, especially if you are excited about your business (as most entrepreneurs are), but remember to give your partners space. It is also important to make time for your personal lives, doing things unrelated to the business to relax and keep your bond strong. This holds especially true for spouses that work together. A good rule to uphold is ‘no business talk after 9pm’.

  1. Undervaluing Non-Family Employees

Being a non-family employee in a family run business can easily feel like a one-way street – that leads to a dead end. They may get the impression that there is no room for advancement, they may be underpaid, they will always lose work related conflicts or that their hard work will go unnoticed. Non-family employees are incredibly important to the success and growth of a business. Reduce your turnover rate by practicing fairness in work-related disputes, offering bonuses or profit-sharing programs and creating opportunities for advancement.

Favouring your family members based on entitlement will quickly cause resentment among your other employees. Always award bonuses and promotions based on merit and hard work, not blood relations. It is also important to note, that employees who outrank family members must be able to act on their authority. Never undermine an employee’s authority when a family member is disciplined for not doing their job.

  1. No Succession Planning

Who will take over the family business when you retire? It is an important question that a large number of business owners don’t have a formal answer to. It’s never too early to begin your succession planning. If you don’t believe anyone in your family is ready to take charge yet, begin training them to do so. It may be necessary to bring in an outside professional opinion to assess the strengths and skills of your succession candidates. Once you’ve made your plan, create a backup plan – or two!

Once you’ve retired, your successor should have the skills and knowledge to fully take over. This means that you will have to give them the reigns, and stay out of day-to-day decisions, as difficult as that may be. Give your successor your trust and support – after all, you’ve been training them for this!

  1. Poor Conflict Resolution

When you work with your family and live with your co-workers, tensions can easily run high. This is a common symptom of spending a lot of time with a small group of people or a spouse, and plays a large role in the deterioration of family businesses. In matters of both business and family, communication is key. When a family issue rears its head, solve it quickly and efficiently – away from the business and other non-family employees.

If it is a business conflict, it should be treated as an issue between co-workers and not family members. Do not bring personal family matters into the conflict, as it will do more harm than good. If necessary, having the help of a neutral mediator or family counsellor can solve any serious conflicts amicably. Living well has a great list of family counsellors in Queensland.

  1. No Clear Mission and Vision Statement

In a recent KMPG and Family Business Australia Survey, it was reported that the primary conflict of family members revolved around ‘vision, goals and strategy’. Having a clear mission and vision statement from the onset of your business will help establish its core foundation. This will prevent conflicting ideas, goals, turf battles, different agendas and confusion. With a solidified common vision, your family and employees will have a better direction of the company’s goals and values. Every business decision should be aligned with this mission statement, and it should live as a written document for future reference.

  1. Lack of Clear Roles and Responsibilities

If you have a small, family owned business, the members of your family likely don’t have solid job descriptions. Everyone has a part to play, and roles seem to fluctuate as needed. However, it is very important to have specific roles and responsibilities outlined for each employee that they can adhere to and excel at. This creates more accountability, and prevents them from stepping on each other’s toes – which can cause unnecessary conflict or reduced productivity.

  1. Poor Skill Development and Evaluations

Every workplace needs a system for evaluating employee performance. Many family businesses do not have such a system in place, either out of a fear of conflict or the sense of family entitlement. All employees – especially family members – should be evaluated regularly and given feedback on their strengths, weaknesses and where they need to improve. This promotes even skill development across the company, and shows your non-family employees that everyone is being treated equally. In addition to this, bonuses and promotions should be given based on performance and merit alone (see #2!).


Hanrick Curran have been advising family business for over 30 years and have a reputation for proactively identifying when these sins are creeping in.  Experience the difference that a Hanrick Curran business adviser can make to your business, contact Matthew Beasley or Nathanael Lee on 07 3218 3900 for a complimentary discussion.



Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.



Thanks to CCIQ for contribution to content.