What is Family Business? Fundamentals, Advantages, difficulties, elements By Tricksskill

What is Family Business? Fundamentals, Advantages, difficulties, elements
What is Family Business? Fundamentals, Advantages, difficulties, elements

You must have noticed that many people mention family business while introducing their work. By the way, most people in India do not have any difficulty in understanding its meaning. Because they take its meaning directly from the family business itself, which is absolutely right. But in India, when this word called Family Business is uttered by a person, people think that since it is that person’s family business, so its size will be very small. It is meant to say that most of the people in India take this word to mean any shop or small establishment, but they forget that not only small establishments or shops come under the category of the family business, but even big companies. Can come under the category of this business.

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In our country India, many misconceptions can be prevalent about the family business, we will try hard to remove these misconceptions and know about the definition, benefits, difficulties elements, etc. of the family business through this article.

What is Family Business?

First of all, want to make it clear here that the definition of a family business is not based on the size of the business. This means that even a small too big business can fall in this category. A family business or family business is a business involving two or more members of the same family. And most of that business is owned and controlled by the same family. If we talk about business, then this type of business can be the oldest because in ancient times people started any business with their family members or joined them later.

Farming can be said to be an early form of family business because almost all the members of the same family were playing their respective roles in this work. If we talk about the urban environment, then many such shops, clinics, etc. will be found here which are working from their home. And all the family members are helping in these works at some point or the other.

Therefore, it can be clearly said that a business in which more than one member of the same family is involved, and most of the ownership and control over it belongs to the members of the same family, can be called a family business. These also include businesses that one generation may have started, and the next generation is carrying on that business. Tata, Birla, Reliance Group, Mahindra etc. are all examples of family business.

Benefits Of A Family Business 

If we talk about the present time, then this time is the time of competition. But even today family businesses are not only flourishing in this competitive economy but are also moving ahead by earning profit. There are many advantages of the family business, some of them are listed as follows.

  • As we know that in the family business, two or more people of the same family are involved, and they also own and control most of the share. That’s why they stay committed to that business because they don’t want their family name to be harmed from anywhere. That is to say, commitment and integrated leadership is a major advantage of Family Business.
  • The family members can choose the leadership on the basis of seniority which they need to follow for a long time. This creates stability and stability in the business.
  • Trust and credibility are important to all business organizations and are generally found in abundance in family business organizations. Because in this the control remains with the members of his family, whom any person can trust more than any outsider.
  • Being members of the same family in leadership, they voluntarily try to play not one but many roles to carry forward that business. Apart from this, they can move in the office at their convenience, hence flexibility and versatility are also included in its advantages.
  • It is often observed that non-family businesses set targets on a quarterly basis. Whereas family businesses think of setting goals on an annual or even a decade basis. This patience of theirs helps them to make effective strategies and decisions in the long term perspective.
  • In a family business, family members do not shy away from contributing their own finances to ensure the long-term success of the organization. That is to say, they can also contribute their own capital when needed and can also work by cutting their salary, due to which this type of business can easily recover from bad times.
  • The coming generation gets the business setup done, they only have to work on the strategy to take that business forward. Due to which that person does not have to face difficulties in the initial phase of business.

Difficulties in the family business  

There may also be some difficulties in the family business, whose list is as follows.

  • Because people of different nature live in a family. Therefore, it is not necessary that what is liked by anyone or most of the family members or who are in favor of one thing, it is not necessary that all should be in the same side. A family member may get this point wrong and may draw dividing lines in the family. Therefore, family discord is a major disadvantage of the family business.
  • Since it is a family business, preference may be given to the members of the family on the basis of seniority of age. That is to say, there is unstructured governance to run this type of business in which hierarchy and external corporate laws are not given much importance. And this can prove to be extremely detrimental to the business.
  • If we talk about the difficulties of the entrepreneurs associated with the small family businesses, then it is coming as a big difficulty for them to get the next generation to enter their family business. Because most of the youth of today prefer to work in a multinational company.
  • The main objective of a person providing leadership in a family business is to keep only the members of his family in a high position, whether that member is qualified or not. That is to say, they are hesitant to appoint an outsider to a higher position. Which can have far-reaching effects on the success of the company. Especially when the reins have been placed in the hands of an unworthy person in the family.
  • In a family business, the king’s son king principle applies, which may or may not be good for a company.

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 Fundamentals Of A Family Business

Whether you believe it or not, in our country India, even today, most family businesses are done. And it is not necessary that the person holding the reins of the family business should be a graduate, postgraduate or a person who has studied any business. Rather, such people will also be found who call themselves illiterate, but they will definitely have knowledge of every small to big information about their business.

Now the question arises that why the person running that business successfully calls himself illiterate. Whereas the reality is that the information he knows about his business today will not even be available to his own MBA son. That is to say, whether a degree or master’s degree is required to pursue a family business or not, but the following three things must be known and these three things are the basics of the family business.     

1. Product Knowledge :

Whether the family business is associated with a manufacturing sector or a service sector, product knowledge is very important for this. That is to say, it is very important to have complete knowledge of whatever service the entrepreneur is selling to the customers, or whoever is running the factory. Suppose the entrepreneur is running an iron factory, then does he know about different iron? Do you know about the problems and difficulties that come in it? Do you know what kind of raw material will be used to make which variety? It is meant to say that it is very important for him to have complete knowledge about the product which is being made by the entrepreneur, only then he will be able to contribute in furthering the family business.   

2. Policy Knowledge :

By Policy Knowledge, we do not mean the internal policies of the company, but the government documents, licenses, and registration, forms, etc. that are required to run that business legally. However, many entrepreneurs running family businesses believe that when they have to get this work done by a Chartered Accountant (CA), then what do they need to know about them. But most of these successful family business entrepreneurs have a different opinion from them and believe that it is important to be aware of the policies i.e. government policies.

3. Communication for Family Business :

If the size of the family business of the entrepreneur is very large, then he will have different employees to talk to outsiders depending on the department. But if it is not so and the entrepreneur is himself from chairman to peon and he has to be involved in all this work then he should have a way to talk to different persons. How to talk to the client? How to talk to a government official? How to talk to a worker? There must be a way etc.

Although here we mean talking to everyone respectfully, the entrepreneur may have to talk to someone in English, talk to someone in Hindi or talk to someone in the local language. Somebody has to tell something, something has to be hidden from someone, so the entrepreneur must come up with a way to talk.

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Things to keep in mind in the family business  

To lead the family business towards success, the entrepreneur may need to take care of many things, some of which are listed as follows.

  • Since family members are also involved in the family business, they should get treatment according to their ability. That is to say, a member of a family should not get special treatment just because he is a member of that family. Such an attitude can even demoralize a family member who is trying to earn respect on the basis of his own merit. Overall, for the success of the family business, the members of the family should also be treated as equal to the rest of the employees.
  • It is often seen that the entrepreneurs who lead the family business believe in nepotism. And you can employ your relatives in your company. Some pay them more than they deserve and some pay them very little. Both these situations are not favorable for family businesses. Therefore, it is better to appoint employees not by looking at the relationship, but by looking at their qualifications and skills.
  • Don’t just think about the well-being and well-being of your family members for your employees are also a part of your business family. That is why loyalty, dividend, and goodwill towards them are also important.
  • The person providing leadership to the family business should take care of what can be best for the family. It is not necessary that it is also good for your business. So keep family goals and business goals separate.

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