Introduction to Family Business

Family businesses have been around for decades and are usually considered as one of the oldest forms of organizations. A family-owned business, as the name suggests, is a business that is owned by at least two members of a family. In a family business, the ownership and control of the business stays within the family. One of the oldest family-owned and operated businesses in the world is Hoshi Ryokan - based in Japan. This hotel is still managed and operated by the same family since the year 718.

However, running a successful family-owned business in Singapore or anywhere in the world might not be a piece of cake. To run a family-owned business successfully, it is necessary to have a proper strategy and plan along with the inclusion of family values. If you wish to set up a family business in Singapore, you can take advantage of its pro-business policies and conducive regulatory environment.

Benefits of Family Business

There are several benefits of being in a family-owned and operated business. Some of them are mentioned below:

Authenticity

For various reasons, employees can find it challenging to voice their concerns freely to their seniors or organization. However, when it comes to a family business, one can be honest and upfront about matters that are concerning him/her without any inhibition. Having the freedom to express their concerns and feedback with utmost honesty can help the family business thrive.

Trust

Without trust and understanding, operating a family business can get challenging. In fact, in all businesses, trust plays a major role. It is even more important in businesses that have trade secrets. In a family-owned business, members can trust each other and talk freely and openly without worrying about any trade secret getting misused.

Control

In a family business, majority of the control lies with the family members. Family members can feel more connected to each other when they work and control the organization together. The family can ensure that control over the operations and functioning of the business stays within the family.

Long-term Outlook

Businesses that are not family-owned may create a blueprint of their goals only for the next quarter or for a short term. The same may not apply to family businesses as they place more importance to meet long-term goals. This strategy helps them sustain for years and decades to come.

Challenges in Running a Family Business

While a family business may have several advantages, one might also want to look at some of the challenges that can accompany it. Some of those challenges are mentioned below:

Conflicting Dynamics

There can be a change of dynamics, interest, and more between family members. These changes can cause conflict between members which can affect the functioning of the family business. Such conflicts can also sometimes lead to the division of the business between the members.

Flouting Rules

For any business to run successfully, it is necessary to have rules and corporate governance. Family members who are in the business might take them lightly which can result in financial losses.

Nepotism

In some family businesses, family members may get promoted to senior management roles without having any proper qualification, skills, and experience. These decisions can prove to be unsatisfactory for the business in the long run.

Factors Impacting the Efficiency of a Family Business

To improve and sustain a family business, individuals can create different plans and strategies that can help the business adapt to current times and meet the requirements of the customers. Some factors that can impact the efficiency of a family business are given below:

Automation of Business Operations

One of the first factors can be the automation of business operations. You may want to check whether business divisions such as HR, finance, accounting, etc., are following manual, time-consuming, and error-prone methods or are automated. Automation of business processes not only saves time and cost but is also less prone to human errors.

Diversification of Business

Business environment changes with time, and so it is necessary for a business to be flexible. What might have worked well one or two decades ago, might not work the same way in current times. For family businesses and businesses in general, diversification can be a viable option to improve the efficiency as well as to expand the business. Diversification can include the addition of new services and products other than the current offerings. This can help in achieving economies of scale and at the same time cater to additional needs of the target audience.

Flexible Culture

The driving force of any organization is its workforce. It is therefore necessary to keep the workforce motivated and happy. Several organizations across the world are now adopting approaches, such as work-from-home arrangements, flexible work timings, a 4-day week schedule, etc., as new forms of work model. Many are even changing the look and feel of the interiors of the workplace to make it look more welcoming. Though embracing such approaches may sound trivial and incur some costs initially, they can be of immense help in retaining employees and ensuring their loyalty.

Exploring Untapped Demand

Expansion of businesses to cater to overseas demands can also be an option for organizations looking to meet untapped demands in order to achieve efficiency. To do so, some of the options available are e-commerce, opening a branch/franchise, and getting into a joint venture. However, to scale a business from local to global, you should undertake extensive business research. Instead of simply selecting an overseas market, you may want to check the market potential, government regulations, barriers of entry, etc. before expanding there.

Integration of Family Values with Business Values

Values are an integral part of every family. When you are running a family business, you may want to integrate these values into your business as well. With changing times, leadership will also change. The new changes and development can unsettle regular customers and partners. By institutionalizing family values into the business culture, you can reassure your customers and partners that the change will not hamper the usual functioning of the company.

Frequently Asked Questions

What constitutes a family business?

A family business is an organization that is owned and managed by at least two members of a family. The control and authority of the business lie in the family members. The family members can also influence the vision of the business.

What are the benefits of a family business?

Family business allow you to enjoy a number of benefits some of which are mentioned below:

• Authenticity
• Trust
• Control
• Long-term outlook

What makes a family business challenging?

Some factors that can make a family business challenging are as follows:

• Conflicting dynamics between family members
• Sense of entitlement
• Nepotism