Essay # 114 - Some people think that the best way to run a business is within the family. What are the advantages and disadvantages of a family run business?

Essay # 114

 

Some people think that the best way to run a business is within the family. What are the advantages and disadvantages of a family run business?

Many countries have a culture of running a family business for generations. While it cannot be denied that family businesses are popular due to their obvious benefits of stability and long-standing reputation, the drawbacks of this system, like clashes between family members and poor performance by future generations, can result in the downfall of such businesses.

Primarily, in a family business, the position of the family members determines who would lead the enterprise, and it stays so for many years until retirement or death. As a result, there is longevity in the working system thereby resulting in longevity and stability for the company. Further, with these attributes, the business can gain goodwill in the market in terms of reliability and responsibility, forging stronger, long-term customer or client relationships. Consider Reliance Industries in India, for instance; the business has run for decades by the Ambani family and it has continued to grow and become more and more successful.

However, the setting of family businesses can have certain drawbacks. The first can be conflict among members that may become deep-rooted with time, resulting in splitting up. Often, these splits are ugly with disputes over financial distributions and relationships destroyed beyond repair. Second, by virtue of the family position, when the new leader ascends the throne, it isn’t necessary that he has the same skills and abilities to run a successful business as his predecessor did. There may be another family member more skilful than him but he may not get the chance to lead. This rigidity may result in the business and the family reputation losing their credibility, damaging the enterprise economically.

To conclude, the major benefits of running a family business are its long life and the resultant reputation that the business owners can enjoy, while the main drawbacks are the chances of family conflicts that may wreck relationships and having a poor successor that may ruin the business.

(318 words)