Family Owned Businesses

Working in a family-owned business can have many rewards. The best advantage of a family-run business is a reduction of the agency problem. This occurs when an employee does not have the same priorities as the owner, and there is a cost involved in keeping everyone pointed in the same direction. Even the owner is the president, they still must contend with other managers. But if everyone is related, and they have each other's best interests in mind, this is less of a problem.

The second is ability to raise their children in the business. Some areas of commerce do not cater well to having kids around. However, in the case of some industries like farming and wine making, even the smallest kids can be put to work and learn the business from the ground up, so to speak. It would have been clear early on which skills each child could contribute and which direction his or her career could probably take. Employees are thus hired knowing far more about the company than most incoming CEO's do.

One would think that if a family business survived long enough to b

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id and promoted based on their performance. Focusing on a career also makes people accountable for their actions within the company. An employee who comes to work late every day would not be promoted. The same should hold true for a family member who acts as if he deserves the job because of his last name. Finally, career planning is critical to make sure that if the business should fail, the family members have the critical skills necessary to find other jobs. According to Loyola University Chicago's Family Business Center, only 30% of family businesses survive from the first generation to the second, and only 11% make it to the third generation. It's not uncommon for family business scions to find that a once-certain career path no longer exists. http://www.chicagobusiness.com/cgi-bin/article.pl?portal_id=47;mpid=47;article_id=20368&seenIt=1) Capital Family businesses have some very severe difficulties in raising capital. To maintain control, stock or ownership interests are usually sold only to related parties. Even selling a minority investment can cause difficulties. So equity must be built through retained earnings, which reduces the income of the owners, or through further family invest
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Approximate Word count = 1963
Approximate Pages = 8 (250 words per page)

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