Many companies in the United States are still family-owned companies for the business world is dominated by family companies. This paper will establish that 77% of small businesses are formed with primary family participation as noted by Cornell University Smith Family Business Initiative. It is necessary since more than half of the total GDP in the nation is produced by such companies.

Therefore, one of the reasons why family businesses fail? What should be done to achieve this goal or how could this failure be prevented?

To assist those many entrepreneurial families which want to learn what to do with their businesses and how to surmount more day-to-day challenges, we posed this question to several businesspeople and practicing professionals – what advice have they for the struggling mommy-and-pop companies? From getting an objective leadership to setting up the necessary boundaries, any of the following may help you set up a family business for generations to come.

Here are 11 reasons why family businesses fail and ways to overcome these obstacles:

• Hire Objective Leadership
• Never to Allow Family Business Interference
• Outsource for Expertise
• Formalize Leadership Roles
• Plan Business Successors
• Talk to Each Other
• Avoid Nepotism at All Costs

• Consider Ways to Expand Resources
• Clearly Define Responsibilities
• Separate Business Finances
• Establish Healthy Boundaries

Hire Objective Leadership

The family businesses are more likely to fail in the case where some individuals are not willing to work or are not managed like any other employee. One must remember that while these people are family, they are, in fact, your employees! If you think you are unable to adequately supervise your family members, then it might be best for a third, unrelated, party to take charge of the Human Resources department. This way, they can counter check any family issue that may be brought at the workplace.

Do Not Inolve Family Members In Operations

The problem with blending business and family is that business is tangible and its focus is on generating revenue while the company of family is emotional- associated with love. This is further complicated when the structure of both can be combined because there are sentiments included in the equation. Do not make this mistake by learning when and where to engage family ties in your business. On the aspect of branding to ensure that a family name gets to the next level, then the formation of the familial unit proves convenient. But for the operating model of the business, you have to deal with them as you would with unrelated individuals, as family involvement complicates things and creates internal tension that hinders scaling and growth.

Outsource for Expertise

Perhaps, one of the biggest challenges that family businesses usually have is that they simply cannot compete with other bigger businesses in terms of marketing strategies. The small businesses must look for the means of achieving efficient standards of running proper marketing campaigns. This means identifying other channels to push your products locally or hire a social media company to improve how effective the business’s visibility. It’s a tough battle, but the moment you have your tribe right, you will see that success starts aligning itself.

Formalize Leadership Roles

Family businesses can also lack a leadership structure which make them to fold. One way avoid this is by going out of your way to document everything down to the tiniest detail. Ensure the leadership structure becomes formal because people need to clearly know to whom to listen to daily. It is advisable to hire outside managers in the course of implementing changes in the leadership hierarchy. Thus the business will be protected.

Talk to Each Other

One of the major causes for business failure in a family business is if the family members are in a conflict with each other, or there is no communication between them. Currently I work together with my father and we own a small business and it’s a family business. When they can work hand in hand, relate and respect each other, their business is on the right track as their relations with their family members.

Avoid Nepotism at All Costs

Being involved in a family business, I understand how many businesses can turn into failures when people do not set proper rules and personal protocol to preserve the personal and business aspects of the relationship. Family businesses can sometimes also be nepotistic, they prefer those whom they have a close bond with more than the competent ones. This can be counterproductive in the extreme and detrimental to the company, it can even prove disadvantageous in the long run. Business management does not really share enthusiasm, and although a business is an enterprise interested in something, it demands far less feeling than thinking. Social and personal relationships that are established and professional interactions both need to start off and be built on the most noble function.

Think about Options to Grow More

An important reason such businesses fail may be that there is a little more limit to the stretch with regard to distribution of resources. For example, in a “mom and pop” shop, usually both of the owners may be limited in some ways outside the business and therefore both their main resource, time, is limited in the business. Likewise, if the business is suffering from financial constraints, then the family probably only have the funds of the family alone. If the owners are not as connected as the company suggests in the inscription, then they stand the benefit of having access to more sources of funding.

– Sayla Sabrin, Vivipins

One must particularly distinguish between organizational roles and responsibilities.

It is probably one of the most challenging hardships that any person could undertake because it percifies business – making it family. Getting along with people is not hard but ego and what people think and personalities that they have can cause a lot of troubles. Of course, you’ll have that in any company, but when family members are included it becomes much more sensitive. It is recommended that relations among individuals be structured to reduce the chance of conflict as well as to prevent anybody from knee capping the toes of the other.

– Jessica Wise, HelpSquad

Separate Business Finances

You may recall a proverb, “To rob Peter to pay Paul.” This is the reason family businesses fail: Someone within the family sibling, grandchild, cousin, borrows from the family account and then proceeds to pay for the expenses of the business. After that the family member does not replenish the money to the personal account. This leads to conflicts and both personal as well as official strains financially. This is easily avoided. Ensure that you have a personal account and a working account that should not be mixed.

Establish Healthy Boundaries

The major cause of business failure is lack of boundaries within a family business. As it relates to family members there is limited anonymity when compared to other business relations; this may cause pressure or hinder communication. For a family relationship, the business may be dissolved contracts and the engagements may be terminated but the family will still remain family and that aspect makes it difficult to break off from a business venture. This should be prevented by drawing boundaries clearly at the beginning. These can be big picture items, such as having an exit plan or even specific tasks such as necessary communication style and frequency throughout the day. By highly defining what you are and are not willing to do, it’s possible to compromise. But remember when you have set clear top lines you have to stick with these top lines, okay?