Home Business Research Common Family Business Problems and Solutions

Common Family Business Problems and Solutions


There are many family business problems and solutions. Family businesses are a vital part of the global economy. It accounts for a significant part of the world’s GDP and employment.

Yet, family business management can be a challenging task, as it involves a unique set of problems.  These problems are not present in other types of businesses. In this article, we will explore some of the family business conflicts that family-owned enterprises face. We will provide practical family business management solutions to help navigate these challenges. 

Family Business Dynamics

Family dynamics are the patterns of behavior, communication, and relationships among family members. It encompasses both individual and group characteristics. That includes aspects such as roles, power dynamics, emotions, and communication styles.  Different factors such as cultural background, family history, etc., shape family dynamics. It impacts an individual’s identity and well-being.

family business dynamics KPMG
Source: https://kpmg.com/cy/en/home/services/enterprise/family-business/family-business-dynamics.html

Causes of Conflict in Family Business

Family business conflicts can arise from a variety of factors, including;

Role ambiguity:

Unclear roles cause confusion and disputes.

Communication breakdowns:

Poor communication causes family conflict and disputes.

Differences in values, beliefs, and goals:

Family members may disagree on the direction and goal of the business.

Power imbalances:

Unfair treatment or unclear authority can cause problems for the family businesses.

Financial issues:

Profit distribution and resource allocation can lead to conflicts.

Succession planning:

Disputes arise when there are many family members looking for a takeover of a business.

Personal issues:

Family disputes can harm business operations and hinder decision-making.

25 Family Business Problems and Solutions 

Succession Planning Challenge

Family Business Succession is one of the most significant challenges in family businesses. This process involves identifying and grooming the next generation of leaders to take over. When the current leaders retire or die. Many family businesses struggle with this process, as it can be difficult to find a suitable successor. The chosen successor is both willing and able to take on the mantle of leadership. 

Succession Planning Solution

According to a survey done by KPMG in 2018, only 17% of families have documented plans.  Writing down policies and procedures is one of the solutions to this problem. You should establish a clear and formal family business succession plan. This plan should identify the criteria for selecting a successor.

The plan should outline the training and development programs. It also outlines the role and establishes a timeline for the transition of leadership. Additionally, it is important to involve all stakeholders in the succession planning process. This includes family members, employees, and other stakeholders.

Communication Issues

Lack of effective family business communication is common in family businesses. Feelings and relationships can affect communication and make it hard to take honest decisions about business stuff.

Communication Issue Solution

The solution to this problem is to establish effective family business communication protocols. This may include regular meetings, such as board meetings and family council meetings. In these meetings, discuss important business matters and make viable decisions. It is important to establish clear roles and responsibilities for family members. Also, establish a code of conduct that promotes open and honest communication.  

Conflict Resolution

Another challenge family business face is conflict resolution. These conflicts arise due to personal relations. This includes different opinions and competing interests.

Conflict Resolution Solution

One solution to this problem is to establish a conflict resolution process. This process should include a formal mechanism for addressing conflicts, such as mediation or arbitration. This should involve a neutral third party. It is important to establish a culture of open and honest communication.  This encourages the resolution of conflicts in a timely and constructive manner.

Family Dynamics

Managing the dynamics of a family business can be a challenging task. It involves balancing the needs and interests of different family members. This can be complicated by issues such as power struggles, decision-making, and transparency.

Family Dynamics Solutions

One solution to this problem is to establish a governance structure. It promotes transparency and accountability. This includes establishing a board of directors that is independent of the family. The board involves all stakeholders in the decision-making process. It is important to establish clear roles and responsibilities for the family members. Establishing a code of conduct for promoting open and honest communication.

Business Strategy Lack

Another common problem that occurs in family businesses is the development of a sound business strategy. This can be challenging, as it requires a clear understanding of the business. This may include the environment, competitive landscape, and the company’s strengths and weaknesses.       

Business Strategy Solution

The solution to this problem is to conduct a thorough market analysis. After analysis, you can develop a comprehensive business strategy.

This strategy should include a clear vision and mission. It may include;

  • a detailed description of the company’s products and services,
  • a marketing plan,
  • an operations plan.

It is important to involve all stakeholders in the development of the business strategy.

Employee Ownership Issues

The most significant family business problem, that family businesses face is employee ownership. When the business is owned by one or a few family members, it is difficult for other employees to feel a sense of ownership in the company. 

Employee Ownership Solution

To overcome this, businesses can put in place an employee stock ownership plan (ESOP) or a profit-sharing program. These programs give employees a stake in the company.  provide an incentive for them to work harder and be more productive. 

Family Trust

Another family business problem in family businesses is trust. In family-owned businesses, trust is always an issue. This problem happens due to personal relations and favoritism.  

Family Trust Solution

To overcome this, Businesses can establish a family trust, for;

  • The legal and financial framework for clear direction
  • Regular family meetings to avoid conflicts.
  • Effective communication to solve disputes.

Financial Literacy Issues

Financial literacy is a big challenge for many family businesses. Often, family members are not trained or experienced in financial management. They face difficulty to make sound financial decisions. 

Financial Literacy Solution

To solve this, they can provide necessary training to family members on financial issues. They also can hire a professional financial advisor who can provide valuable guidance.

Mentoring Issues

Another common challenge for family businesses is mentoring. When a business is taken over from one generation to the next. It can be difficult for the new generation to learn the skills and knowledge needed to run a business.


To overcome this issue you can establish a mentoring program. Where the older generation can pass their knowledge and experience to the younger generation. You can also hire industry experts or consultants who can provide valuable guidance and support.

Financial Management Challenge

Effective financial management is crucial for the success of any business. This is especially good for family businesses. Financial management involves maintaining financial records, developing a budget, and implementing financial controls. With a few effective steps, you can manage family business finance like a pro.

Financial Management Solution

The solution for family business finance is to establish a financial management system that includes;

  • accurate financial records,
  • a budget,
  • and financial controls.

This system needs regular monitoring to ensure that it is functioning. The system also identifies areas for improvement.

Legal Issues

Legal issues can arise in any business, and family businesses are no exception. These issues can include contract disputes, employment law, and intellectual property.

Legal Issues

The solution to this problem is to establish a legal compliance program for regular legal reviews and audits. This program needs regular monitoring to ensure that the business is in compliance with all relevant laws. It is important to involve legal experts in the development of policies and procedures. This program establishes a system for addressing legal issues in the present and future. 

Professionalization Challenge

Professionalizing a family business means making changes to how it is run to make it more like a professional company. This includes having clear management rules, a set structure for how jobs are done, and clear responsibilities for employees. It can be challenging, but making these changes can help the business be more successful.

Professionalization Implementation

To overcome the challenges of professionalizing a family business, it’s important to create a plan. This plan should include a timeline for when changes will happen. It also includes a description of what those changes will be and a way to let everyone involved know about the changes. Having a plan in place will make the process smoother and help ensure the business can make the transition.

Governance Structure

Managing any business is challenging, but it can be especially difficult for a family business. To be successful, it’s important to have clear policies, hierarchies,  and procedures in place. This ensures transparency, accountability, and effective decision-making. This helps to create a well-run business that can achieve its goals.

Governance Solution

To make running a family business easier, it’s a good idea to have a clear plan in place for how decisions will be made. This can include having a board of directors that is not part of the family, and a family council. Regularly checking in on this plan helps make sure it’s working well. It’s also important to have clear jobs for family members and employees, and rules for how everyone should act to keep the business running smoothly.

Power Struggles Challenge

Power struggles can arise in any business, and family businesses are no exception. These struggles can be caused by competing interests, conflicting opinions, and personal relationships.

Power Struggles Solution

To make running a family business easier, it’s important to have a plan in place for how power is shared and decisions are made. This plan should be regularly checked to make sure it’s working well. It’s also important to have clear jobs and rules for family members and employees. Having these things in place helps make the business run more smoothly and ensures everyone is accountable for their actions.

Decision-Making Conflict

Making good decisions is hard for any business, and it can be especially tricky for a family business. To make the best decisions, it’s important to listen to everyone’s thoughts, weigh different options, and choose what is best for the business overall.

Decision-Making Solution

To help make good decisions in a family business, it’s important to have a clear plan in place for how decisions will be made. This plan should include a way to consider everyone’s ideas, evaluate different options, and choose what is best for the business. Checking in regularly on this plan helps make sure it’s working well and identifies any areas that need improvement.

Transparency Challenge

Transparency is important for the success of any business, but especially for family businesses. Being transparent helps keep everyone accountable, makes it easier to make good decisions, and builds trust among those involved. Lack of transparency can cause problems and even lead to the failure of a family business.

Transparency Solution

To help make a family business more transparent, it’s important to have a clear policy in place for open communication and sharing of information. This policy should be regularly checked to make sure it’s working well and to identify any areas that need improvement. Involving everyone involved in making this policy helps make sure everyone is on board and that the policy works for everyone.

Leadership Development Challenge

Developing strong leaders is important for the success of any business, but especially for family businesses. This involves finding and helping people grow into leaders who can guide the business in the future. Good leadership is key for any business to succeed.

Leadership Development Solution

To help develop leaders in a family business, it’s important to have the right path in place for training and growing future leaders. This path should include things like training opportunities, mentorship, and chances for leadership roles. To make it successful, everyone involved in the process makes sure everyone is working towards the same business goal.

Employee Relations Challenges

Having good relationships with employees is important for the success of any business. Keeping employees happy and feeling good about their job makes the business successful. Good employee relations can lead to higher productivity and a better workplace. 


To make sure employees are happy and feel connected to the company, it’s important to have a plan in place. This plan should have open communication, rewards for good work, and chances for growth. Check this plan often to see if it’s working and if anything needs to be changed. Everyone should be a part of this plan, including employees and those in charge. Showing employees they are appreciated, even with inexpensive gifts for employees, can also help improve relationships.

Business Valuation Challenge

To determine the value of a family business, there are different methods and tools that can be used. These methods take into account factors like the financial performance of the business, its assets, and its potential for growth. It’s important to have a good understanding of the value of the business for important business decisions. These steps play an important role in selling or seeking financing. 

Business Valuation Solution

To make sure a family business is valued accurately, a plan is needed to figure out how much it’s worth. This plan should take into account things like the company’s money situation, what’s going on in the market and industry, and what others think. Checking in on this plan often helps make sure it’s up-to-date and any changes can be quickly identified. Everyone involved in the business should have a say in this process.

Risk Management Issues

Effective risk management is crucial for the success of any business, and this is especially true for family businesses. Risk management involves identifying, assessing, and mitigating risks that could negatively impact the business.

Risk Management Solution

To solve this problem, it’s a good idea to have a plan in place for managing risks in the business. This plan should include steps for identifying possible risks, figuring out how bad the impact could be, and coming up with ways to prevent or reduce the impact of those risks. Checking on this plan helps make sure it’s working well and identifies any new risks that need to be addressed. Involving everyone in the process helps ensure that everyone is aware of the risks and working together to cut them.

Mergers and Acquisitions Challenge

Mergers and acquisitions involve the combination of two or more businesses. The Mergers and acquisitions can be a viable strategy for growth and expansion, but they also come with a unique set of challenges. In a family business, these challenges can include issues related to ownership and control. It is hard to integrate and maintain the company’s culture and values in the family business. 

Mergers and Acquisitions Solution

It can be solved by establishing a clear and formal process for evaluating and executing mergers and acquisitions. This process should include due diligence, market research, and a detailed integration plan. It is also important to establish a defined structure for transparency and accountability for mergers and acquisitions.

Shareholder Agreements Challenges

Shareholder agreements are an important part of any business, and family businesses have no exception. This agreement outlines the rights, responsibilities, and obligations of shareholders. 


In simpler terms, a shareholder agreement is a document that spells out how a business will be run and who gets to make decisions. It’s important to involve everyone who has a stake in the company in making this agreement so that everyone is on the same page and knows what to expect. This agreement should be reviewed from time to time to make sure it’s still working well and to fix any problems that come up.

Exit Planning Challenge

It is an important aspect of any business, and this is also important for family businesses. Exit planning involves preparing for the eventual sale or transition of ownership of the business.

Exit Planning Solution

Create a clear and formal exit plan that outlines the steps that will be taken to prepare for the eventual sale or transition of ownership. This plan should include a clear timeline and a detailed description of the exit steps that will be made. It also can include a communication plan to inform all stakeholders of the changes.

Family Council

A family council is an important aspect of any family business. It is a forum for discussing family business problems and solutions and making decisions that are necessary for the business.  It can be challenging when it does not work in the right way.


Regular meetings for discussing important business issues are the way to make the family council useful for the business. This council should include all family members who are involved in the business. To make it more reliable it should be chaired by an independent third party. 

Employee Engagement Problem

Employee engagement is an important aspect of any business, and family businesses are no exception. When employees are engaged, they are more productive, motivated, and committed to the business. 


To make employees feel more connected to their job and the company, businesses can create a work atmosphere that makes people feel happy and appreciated. This can be done by offering training and growth opportunities and setting up programs to thank employees for their hard work.

Other Work-Related Challenges Family Business Might Face


In simple terms, innovation helps businesses grow and succeed. But, sometimes family businesses have trouble making innovation happen. To fix this, they can either create a special team for innovation or choose one person to be in charge of finding new ideas and making them happen. Also, making sure everyone talks and works together can help make the business more innovative.

Market Analysis

For family businesses, it’s important to understand what customers want and what’s happening in the market. To do this, they can gather information in several ways. They can ask customers questions through surveys, have small group discussions with them, and look at what their competitors are doing. This information helps family businesses learn about customer needs, likes, and market trends. They can also hire a company that specializes in finding out this type of information to help them out.

Marketing Strategy

For a family business to succeed, it’s important to have a good marketing plan. To make one, they can do a market research study, find out what their competitors are doing, and figure out who their ideal customers are. By doing these things, they can create a clear picture of what they want to achieve and how they’re going to do it. They should also think about their brand and how they want people to see them, and invest in advertising and promotions to get the word out about their business.

Operations Management

Good management of a business’s day-to-day operations is important, especially for family businesses. To make sure things run smoothly, family businesses can simplify their work processes, cut costs, and make things more efficient. They can also use software to keep track of their supplies and make sure their products are high quality.

Organizational Structure

Having a clear and strong organizational structure is very important for a family business to run successfully. This means figuring out who does what and having clear ways of talking to each other. It also means having rules and plans in place. Regularly checking and changing the structure as needed will make sure it stays helpful for the business as it grows and changes.

Performance Management

Having a system to manage the performance of your family business is very important. To make this happen, you need to first set specific goals and targets. Then, keep track of how well your business is doing and give feedback to your employees. It’s also helpful to have a formal process for checking how well each worker is doing and figuring out what can be improved.

Product Development

Product development is important for family businesses too. To develop new products, family businesses need to find out what customers want and need. They should research and create new products and test them before putting them out for sale. It’s also important to keep an eye on existing products and update them so they stay competitive in the market.

Resource Allocation

Effective resource allocation is important for every business, including family businesses. To divide resources equally, family businesses should first figure out which projects and goals are most important. Then, they should give these projects the resources they need to be successful. Finally, they should keep track of how resources are being used to make sure everything is working well. It’s important to re-evaluate resource allocation to make sure resources are being used in the best way possible.

Sales Strategy

Running a successful family business requires a strong sales strategy. To do this, the business needs to figure out the need of its customers, create plans to reach potential customers, and track its sales progress. It’s important to check and make changes to the sales strategy to make sure it is working in the right direction.

Service Strategy

Developing a strong service strategy is essential for any business, and family businesses are no exception. This includes identifying customer needs and preferences, developing service standards and procedures, and tracking service performance. Additionally, regularly reviewing and adjusting the service strategy can ensure that it remains effective and aligned with the overall goals of the business.

Supply Chain Management

Having a strong supply chain is important for any business, including family businesses. To have a successful supply chain, family businesses should find and work with reliable suppliers. They should make sure their delivery and transportation systems are working well, and keep track of how much inventory they have. Using a supply chain management system can also help make sure everything runs smoothly.

Technology Adoption

Having the right technology is important for family businesses to stay competitive. Keeping up with the latest trends and advancements is key. The family business can do this by finding new technologies that can help the business grow, teaching employees how to use them, and reviewing and updating the technology regularly. It’s also a good idea to make a plan for how the family business will handle the technology so that everything runs smoothly.

Time Management

Time management is important for all businesses, including family businesses. This means setting specific goals and deciding what tasks are the most important. You also need to make a plan for how to use your time and stick to it. Having a system in place to help manage your time, like a schedule or timeline, can make sure everything gets done on time.

Training and Development

Giving training and helping employees grow is important for any business, including family businesses. This means teaching employees about new technology, what’s happening in the industry, and the specific skills they need. Providing chances for people to learn and advance their careers can help keep talented employees and make the business do better. It’s also important for family members who are part of the business to get training and development opportunities.

Employee Retention

Keeping good employees is important for all businesses, including family businesses. To do this, you need to create a good work atmosphere, give workers a chance to grow their careers, and have programs to recognize and reward them. You should also ask your employees for their opinions through surveys and focus groups to see if there’s anything you can do better.

Employee Motivation

Getting your employees motivated is important for any business, even family businesses. To do this, you need to set clear goals and let them know what they need to do. Give them feedback often and give them chances to move up in the company. Having a good work environment and making them feel like they have a stake in the business can also help keep employees motivated.

Employee Performance

Making your employees do their best is important for any business, and that’s true for family businesses too. One way to do this is to give them training and chances to grow. Using a system to judge how they’re doing, and giving them feedback and help. Also, creating a good work environment. Also making them feel like they’re part of the company can also help them perform better. .

Employee Satisfaction

Making your employees happy is important for any business, and family businesses are no exception. One way to do this is by creating a good work atmosphere, giving them chances to grow their skills, and having programs to thank and reward them. Also, offering a fair salary and benefits can also make your employees happy.

Employee Development

Helping employees grow and learn is important for any business, including family businesses. One way to do this is by offering training sessions and having a mentoring program. The other is giving chances for promotion. Creating a happy workplace and making employees feel like they have a stake in the company. It can also help encourage personal and professional growth.

Employee Recognition

It’s important for family businesses to acknowledge and give rewards to their employees like any other business. This can be done by starting recognition and rewards programs.  Get regular feedback and support, also offering chances for growth. Celebrating employees’ efforts and achievements can also help increase their morale and motivation.

Story of a Successful Family Business

Sam Walton started Walmart in 1962 and he never expected it to become so big. Walmart grew into a huge retail store and still is today.

When Sam passed away in 1992, he gave half of Walmart’s ownership to his wife and kids. They keep control of these shares through a company called Walton Enterprise.

Many members of the Walton family have helped with the company over the years. Right now, Jim and Steuart Walton are working on the board of directors. This shows that the Walton family is dedicated to keeping the success of Walmart going, even after all these years.

Walmart is now one of the largest retailers in the world, with thousands of stores in countries all over the world. They offer a wide variety of products, including groceries, electronics, clothing, and home goods. Walmart is known for its “Everyday Low Prices” slogan, and the company works hard to keep its prices low for customers.

One of the keys to Walmart’s success has been its focus on providing excellent customer service. They train their employees to be friendly and helpful, and they work to make sure that their stores are clean and organized. Walmart is also known for its innovative use of technology. For example, they use data analytics to better understand customer behavior and improve their supply chain.

In recent years, Walmart has also made a big push to be more environmentally friendly. The company has set goals to reduce its carbon footprint and increase its use of renewable energy. They have also made changes to their packaging and transportation practices to reduce waste.

Overall, the Walton family and Walmart have proven that with hard work, dedication, and a focus on customers and employees, a family business can become a global success story.


Family businesses face unique challenges, but by understanding and addressing these challenges, they can be overcome. By implementing solutions such as employee ownership plans, family trusts, financial literacy training, mentoring programs, employee engagement initiatives, and effective management strategies, and by effective family business management. Family businesses can improve their performance and achieve long-term success. In this post, we have discussed a number of family business problems and solutions to give you an idea of what problems you can face and how to be ready for success.


Waqar Hussain is the founder of The Business Goals. He writes about entrepreneurial strategies and is an SEO consultant by profession. He is a B.Com, GDM, and an MBA from the Australian Institute of Business.



Please enter your comment!
Please enter your name here

Are You An Entrepreneur?

Join Our Mailing List For Growth!

Exit mobile version