Small family business: Benefits and hurdles of working with relatives

Small family business: Benefits and hurdles of working with relatives

Kim Mercado
By Kim Mercado
Mar 21, 2024
1 min read

Though small, family-owned businesses play a big role in the U.S. economy. According to SCORE, the U.S.’s largest network of small business mentors, of the 28.8 million small businesses in America, 19% are owned by families.

“Family-owned” usually means any business in which two or more family members operate the company. It could also mean that the majority of ownership or control lies within a family. Approximately 1.2 million family-owned small businesses in the U.S. are run by a husband and wife.

These businesses offer many benefits, like a close-knit work environment, a shared sense of unity and purpose and the ability to make impactful decisions. But there are challenges, too, like juggling personal and professional boundaries, succession planning and working with limited resources.

In this post, you’ll learn about:

Family-owned business advantages

In our personal lives, our family is our team. It makes a lot of sense to bring teamwork, camaraderie, and shared values of family life into our professional lives. There are many advantages to working with family members.

Business IS personal

Let’s face it: a family-run business is very personal. Like other small businesses, family-owned businesses invest huge amounts of time, effort and emotion into getting it off the ground. However, having family members involved in this growth adds another layer of emotion and complexity to entrepreneurship.

For example, it can be sad to imagine closing the business down or leaving it to a stranger one day. With family-owned businesses, many owners dream of passing the business to their child or another family member. It allows them to share something important to them while leaving a valuable asset for the next generation.

Knowing your employees

Hiring a new employee can be risky. While everyone has their strengths and weaknesses, by hiring relatives, you lower the risk.

You may or may not be getting the most talented employee out there (hopefully you are), but you can be sure that you’re not hiring someone who’s lied on their resume.

Trust and loyalty

One of the significant advantages of working with family members is the foundation of trust and loyalty that exists. The long-standing bonds and shared history among relatives foster a deep sense of trust, creating a work environment built on mutual support and commitment.

This trust can result in more effective collaboration and communication. Family ties often mean that employees can rely on each other, knowing that their relatives have their backs through thick and thin.

Shared vision and values

Family-owned businesses often thrive on a shared set of values and a long-term vision that is passed down through generations. This alignment of values creates a strong sense of purpose and unity among family members working together.

This shared vision also contributes to the development of a unique company culture, reflecting the family’s values and creating a distinct identity that employees can rally behind.


Working with relatives in a small family business often brings a level of flexibility that may be harder to find in other work environments. Family members are more likely to be empathetic and accommodating when it comes to personal matters or unexpected emergencies. This flexibility may allow for a better work-life balance, as family ties often mean that employees can count on support and understanding when facing personal challenges.

Long-term commitment

Family-owned businesses benefit from the long-term commitment of family members. With a vested interest in the success and longevity of the business, family employees often demonstrate a higher level of dedication and loyalty. They are more likely to go the extra mile, working with a sense of pride and responsibility to ensure the business thrives.

Small family business problems

Of course, having a family-run business isn’t that simple. Take a look at some of the challenges that small family-owned businesses face, and you may wonder, “Can family members work together and succeed?”

Other employees

Working in a small family business can be an uncomfortable experience for employees who aren’t members of the family. They may wonder if they’re being left out of decision-making processes or if there’s unequal treatment of different employees. They may even be worried about getting caught in the middle of family squabbles.

Limited perspectives

Working primarily with family members may result in a need for more diverse perspectives and fresh ideas. Family members often share similar backgrounds, experiences, and ways of thinking, which can hinder innovation and creativity. With the input of external voices, the business may gain valuable insights, alternative approaches and fresh solutions to problems.

Lack of expertise

Family members may only sometimes possess the necessary skills or qualifications for specific roles within the business. While loyalty and trust are valuable, hiring decisions should also prioritize competence and expertise to ensure the business thrives.

Relying solely on family members for key positions can limit the company’s ability to attract and retain the most qualified individuals, potentially hindering growth and innovation. It is essential to assess the needs of the business objectively and seek external help when necessary.

Blurred boundaries

One of the challenges of working with family members is the potential for blurred boundaries between personal and professional relationships. Disagreements or conflicts that arise in the workplace can easily spill over into family gatherings, creating tension and strain.

It can be challenging to separate business decisions from personal feelings, making it crucial to establish clear communication channels and conflict resolution strategies to maintain healthy relationships.

All your eggs in one basket

Relying solely on family members for key positions can create certain risks. For example, if the business encounters challenges or downturns, it may be more difficult to navigate and recover when the entire family’s livelihood is at stake. You won’t have a backup to see you through.

Succession planning

Determining the next generation of leadership and ensuring a smooth transition can be a complex and delicate process in family-owned businesses. Conflicts and disagreements may arise when deciding who will take over the business when the current generation retires or steps down. Without a well-thought-out succession plan, the business may face instability and potential rifts among family members.

Family business best practices and solutions

Every family business is unique, so it’s essential to adapt guidance to your personal situation and dynamics. Generally, best practices include:

  • Communication is key: Establish open and transparent communication channels among family members to avoid conflicts. Regular family meetings and business discussions help ensure alignment with the business’s goals and vision.
  • Plan for conflict resolution: Establish a fair and impartial process for resolving disputes among family members, seeking professional, impartial mediation if necessary.
  • Define roles and responsibilities: Clearly assign tasks based on individual strengths and expertise, ensuring everyone understands their contributions and areas of authority within the business.
  • Separate personal and professional matters: Establish clear boundaries between personal and professional relationships, avoiding the mixing of emotions and personal issues in the workplace.
  • Seek external expertise: Engage consultants or advisors who can provide objective insights and guidance to resolve conflicts, offer strategic direction, and bring fresh ideas.
  • Develop a succession plan: Create a well-thought-out plan for leadership transition, involving all relevant family members to maintain business continuity.
  • Stay agile and open to change. By embracing innovation, technology and market trends, your business can remain competitive.
  • Maintain a healthy work-life balance. Strive to maintain a healthy balance by encouraging downtime, family activities, and personal growth outside of work.

Discover how NEXT supports small family-owned businesses

Because NEXT is dedicated to small businesses, we understand the unique challenges and aspirations of owners. Our affordable and customizable business insurance coverage provides the confidence and protection needed to take smart risks and expand your business.

With a free instant quote, you can quickly assess your coverage needs. Purchase online and receive proof of insurance in about 10 minutes.

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Kim Mercado
About the author
Kim Mercado is a content editor at NEXT's blog, where she writes and edits posts for small business owners. She enjoys helping entrepreneurs solve their business challenges and learn about insurance. Kim has contributed to Salesforce, Samsara and Google.

You can find Kim trying new recipes and cheering the 49ers.

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