Family Run Business (Outweigh)

 




Many businesses in the world today are run by family members. Do the advantages of family-run businesses outweigh the disadvantages?

It is observed that a significant number of businesses are actually family run. These type of businesses have certain advantages such as trust among the owners but on the downside, lack of expertise and limited financial resources are some key disadvantages. 

The element of trust among the key stakeholders of a business is vital not only in the success of the company but also for it is sustainability. When it comes to a family owned business, trust issues usually do not exist as the board members are related to each other. The confidence generated through this trustful relationship in the company’s leadership team supports in decision making and ensures smooth implementation of new ideas. A good example would be of Tetra Pak, a leading global organization in food and beverages sector is actually owned by the Rausing family of Sweden, and the level of trust among the board of directors is quite appreciable. Therefore, confidence and faith in each other when it comes to successfully running a business is crucial.

Family run businesses often lack in a few key aspects such as relevant knowledge and experience and financial capabilities of the owning parties. Firstly, it must be noted that every business demands certain skills, knowledge, experience, and qualities from its driving committee. With the focus on keeping the business in the family, these critical aspects often get neglected causing harm to the company’s operations, competence, and progression.

Another critical aspect where family owned businesses suffer is lack of financial muscle. Since investors are usually not invited to be a part of the management, the company has to survive either on the equity investment from the board members or through loans from financial institutions. A similar case is with Tinopal industries in Sialkot Pakistan, where due to the lack of knowledge and financial constraints the growth and expansion opportunities have became limited.

In conclusion, I believe that the family run businesses often have some serious problems such lack of competence and financial resources which outweigh its benefits like the trust factor among the board members.

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