Red Flags To Know Before Joining The Family Business

By Stefanie O’Connell

WWR Article Summary (tl;dr) Entering a family business can be tricky not only for the family member joining the organization for the the employees who already work at the company. One business expert recommends that family members work outside the family business first to learn humility and confidence. Working elsewhere can be an opportunity to “build up your credibility so that the staff sees you as a viable employee, not just the kid with the lucky spoon in his/her mouth.”


Joining the family business might seem like a no-brainer. Chances are, you’re already familiar with many of its inner workings, especially if you worked for family when growing up.

You might also feel a strong sense of pride and fulfillment carrying on the business legacy of your loved ones. But even with those benefits, joining a family business comes with major challenges.

It’s gotten harder to operate a family business over the past five years, according 74 percent of respondents to a 2015 survey by family business advocacy group Family Enterprise USA. Not to mention, mixing business with personal relationships was never easy to begin with. So before you decide to go all in and join the family business, watch out for these red flags.

Some people might decide to join the family business because they think they won’t have to work hard to build the business themselves. Or perhaps they feel they can walk right in and get a job on the spot without an interview, after all, it’s family. But this sense of entitlement can be a big red flag.

“If a new family member enters the business without any prior experience, they come in with no credibility to others in the organization and potentially low confidence,” said family business expert Laura Michaud of The Michaud Group. “This will reflect poorly in both performance, as well as respect from others.”

Michaud recommended working outside the family business first to learn humility and confidence. Working elsewhere can be an opportunity to “build up your credibility so that the staff sees you as a viable employee, not just the kid with the lucky spoon in his/her mouth,” she said.

On the flip side, some people might decide to join the family business because they feel trapped into it.

It’s no secret that the job market wasn’t in great shape just a few short years ago. Although the unemployment rate dropped to a five-year low of 4.7 percent in May, the picture wasn’t so rosy a few years ago when many millennials were first joining the job market. Those who could join family businesses had an advantage over those facing unemployment and underemployment.

That said, those circumstances might have left some people feeling trapped into joining their family business just to have a job. However, even those who want to join the family business might end up feeling trapped in the future by a lack of advancement opportunities. Furthermore, of college students who are potential successors to family businesses, only one in five were open to the possibility of taking it over someday, according to a 2015 Ernst & Young study.

This red flag could be a deal breaker for those who find themselves unsatisfied and unable to advance within the confines of their family business. “Unhappy family members with no passion can tear a business down,” said Michaud. “Make sure you are entering for the right reasons, and make them clear.”

Whether you join an existing family business, or decide to start one of your own, running or having significant responsibility for the success of a small business is no easy feat. It can be easy to get sucked into day-to-day business operations and forget to form an identity and life outside of work.

While it’s important to work hard and build relationships with colleagues and clients, time off is necessary for everyone. “In order to keep harmony in the family and success in the business, it is best to keep family matters out of business decisions, and vice versa,” said Michaud. “This way, you will still feel good going to Thanksgiving dinner and function well at work.”
Avoid this red flag by setting boundaries early on, before you dive into working with family.

Only 27 percent of family firms have a discussed and documented succession plan in place, according to the PwC survey. This might explain why 30 percent of family businesses survive into a second generation, according to Family Business Review. When a business lacks a succession plan, it sends the message that the business hasn’t properly planned for the future.

The dangers of this red flag can be multifaceted. On one hand, a lack of succession planning can lead to many problems when the owner retires or passes away. At the time of death, businesses can be subjected to a wide variety of concerns, including estate taxes, tax codes and other rules.

Another concern for businesses and employees could be who takes charge of business operations next. If it’s left up to the family members to decide without written documentation, a rift could divide the family and the business.

“Unprepared successors taking on leadership roles can lead to irreparable family breakdowns and affect the business’ ability to grow profitably or meet customer and shareholder commitments,” said Ed McMasters, marketing, communication and design director of marketing agency FUSIONWRX. He recommended asking about governance documents and processes, including: whether there’s a family charter in place; if there’s a board of advisors or directors; if succession planning is a priority; and what the strategic plan is.

Working for the family business might be rewarding, but it can also prove quite complicated. Be wary if you spot any of these warning sings to make sure you’re not getting in over your head.

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