Family Business Feuds

Family Business feuds often erupt in family businesses. There is usually a certain amount of drama within any family, and it can be manifested quickly in a family business setting.

Feuds in the smaller family business are not as big a problem as they are in larger family businesses. A parent/child, or sibling, owned family business dispute can usually be resolved quickly with a simple discussion.

However, the problem can't be bottled up by one of the family members involved, just hoping it goes away. In any business relationship, every issue must be brought out into the open and resolved quickly.

For the larger family owned business, with several family members as owners, family business conflicts can drag down the entire business if not addressed early.

This is especially true where there are family members who are owners, but not employees, and have no day-to-day contact with the business.

Here are some of the ways that family business feuds can be handled properly:

  • The most important time to resolve family business conflicts is before they start. This means that as many foreseeable potential problems as possible should be addressed at the time the business is created… or today, if that has not yet been done. Review these items in the report titled Creating a Family Business.

  • When family business disputes arise, and the issue is purely about the operation of the business, it is usually best to address the issue at a regular board meeting. Get the item on the Agenda before hand so there are no surprises.

    This is the meeting where outside advisors are also present so there is a broad spectrum of professional input when addressing the business problem.

  • If the issue is more personal, or family related, the problem might be better addressed at a family business meeting—which is quite different from a regular board meeting.

    This meeting is much less formal and is where internal family matters relating to the business are better resolved. The meeting must not be allowed to disintegrate into chaos however.

  • When setting up, or revising, a family business, there should be a procedure put in place for family business conflict resolution. This approach should spell out how conflicts would be handled, and all family members would have to agree to the procedures spelled out at the time it is set up.

    Everyone would also have to agree to abide by the decision of the resolution process in the event of a conflict.

Unfortunately, the larger the family and the more family members who are involved, the greater the possibility of having family business feuds. That is why it is so important to set up a system for handling conflicts right from the start—in the original family business plan.

It is also always best to resolve all issues and conflicts quickly, before they turn into a family business feud. Don't let concerns and issues fester and stew—and by all means stay out of court.

In the event a conflict cannot be resolved reasonably, the obvious alternative is to buy out the complaining owner.

That is another reason to always have buy/sell agreements put into place when creating a family business, so that retiring owners, deceased or incapacitated owners, or disgruntled owners can sell their interest at a fair price.

When all of this is agreed to in advance—family business feuds are kept to a minimum.

There will always come a time when someone in the family must sell their stock, and since it is never traded publicly it is difficult to put a value on it.

The next report discusses valuation methods with suggestions on how to handle the transfer of ownership in a family business. Click here to see the report titled Family Business Valuation.

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