Essay Sample on Advantages and Disadvantages of Family Enterprises

Family-owned businesses provide a lot of positive reinforcements when it comes to building up a new or even existing company. However, many struggle to endure the variety of challenges that come face the owners. Running a business whether small or large always has benefits and drawbacks. Family enterprises have their own set of advantages and disadvantages. I will go over them along with some tips for struggling businesses that might help keep their business intact.

A family-run business consists of one or more members of the family who hold the ownership of the firm. Firstly is the sole owner who is responsible for all the activity that takes place in the field. For example, the maker of the French cognac which was founded in 1863 has been running its firm generation by generation through sole ownership. The current owner, Cyril Camus noted that with only one family member participating has kept the business going making any conflicts rare. However, there is one disadvantage to being a sole proprietor. Each time a generation passes, it is difficult for the current owner to predict who it will pass on to next assuming they have some form of benefit that they can put to the table. What makes it risky is either the lack of talent the next owner would possess and also leaving behind the prior owner's expertise in the company. The next form of ownership is a partnership, which is strictly limited to family members working together. The partnership allows members to gain insights from more than one person, which benefits the company. The disadvantage of this sort of partnership is that members may disagree about who is the owner or who is the most important member of the group. The third type of ownership is distributed ownership, in which ownership is divided evenly among family members, which is ideal when each person has a substantial stake in the company. Votorantim, a Brazilian business, is an example of this sort of ownership. As each generation succeeds, each member distributes their shares evenly in order to maintain an equal decision among everyone. The disadvantage of this is that if one party decides to withdraw from the work, the amount of investment and/or work that the company must hold to keep the business functioning is reduced. Finally, we have concentrated ownership, which is unusual in today's world. Concentrated ownership occurs when any family member of the business can be the owner and have equal distribution in the field's decision-making. What makes this tough is deciding who has the last say, which becomes increasingly complicated as generations pass. In order to have the majority vote, someone would have to own more shares than the rest of the group. This poses some danger to the firm, as well as the possibility of members losing interest and selling their shares.

The desire of running a family business might become a reality and lead to the establishment of a profitable firm. Encouragement to work hard with your family is one of the positive attributes that would be recognized. Members are more likely to work hard for persons they know than for strangers. Additional characteristics would be a deep grasp of the company that members of the firm have obtained from past owners, a well-structured organization, strong client relationships, and a professional marketing sales team. Having family members around the business makes it more difficult for you to feel at ease in the atmosphere and to become acquainted with the firm itself. Owners typically have their descendants come around to work little by little over time to ensure that they grasp the work that is being done so that in the future, he or they will be confident enough to know what is to be expected in the workplace. This also saves time for both the firm and the descendants in terms of reducing business training costs. Finally, having a family-owned firm saves time and money spent on employers. With this, no additional dollars are required for advertising or interviews, and no training hours are required for the organization to complete all of the work properly.

The desire to operate a family business can become a reality, but it does not always triumph over the positive and negative aspects that come with owning a family-owned firm. One of the many issues that can arise in these businesses is the presence of family members. Decisions are critical while running a business, and if one family member disagrees, it can lead to conflict among family members. This would lead to further decisions leading to additional disputes, which would harm not only the business but also the family tie. Furthermore, it would bring the heat from work home, producing internal confrontations amongst spouses or family members. Again, having internal disagreements would result in concerns with family members abusing specific corporate policies, having personnel resent certain groups, promotions and pay would be severely impacted, and so on. All of these difficulties will only cause the company to fall further behind and eventually fail.

To summarize, the rewards of a family-owned business amount to the challenges that will be faced. Finally, it is critical to maintaining the principles and beliefs of the company and family apart. Family companies are intended to be built on strong bonds, loyalty, and trust. Only then can a family-run firm be considered genuinely absolute.