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Overcoming the Challenges of a Family-Owned Small Business

April 30, 2015
Small Business
Family-Owned Small Business
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Rebecca Miller and her mother Jeanne Plumley are equal owners of Peggy Jean’s Pies, a 1,000-square-foot pie shop that reopened last year in Columbia, Missouri, after a successful Kickstarter campaign.

It’s a true family-owned and family-run business: Miller assists customers and runs the blog and social media accounts while her husband, Jason, helps run the website and does all of the hiring and payroll. Plumley bakes the pies and handles the kitchen staff, and Plumley’s husband, Dale, washes dishes. Miller‘s children, Hayden, 12, and Ellery, 9, work at the store during school breaks.

“When I say our lives turned upside down in a year, I mean it,” Miller says. “We took our whole lives, shook it all around, and amazingly what got thrown back at us is way better than anything I ever knew before.”

Family-owned businesses like Peggy Jean’s Pies account for 90% of all businesses in the U.S., according to the U.S. Small Business Administration.

That doesn’t mean starting a family business is an easy task — or even a good idea for every family. Letting personal issues spill into the business, giving special treatment to relatives over other employees and not properly communicating are just a few common issues unique to family businesses. But if you overcome these challenges, the experience can be quite rewarding, according to several small business owners. 

The challenges

Although everything is going smoothly now at Peggy Jean’s Pies, some of the pressures early on made it difficult for the family to work together.

“We would disagree over issues both large and small,” Miller says. “We really sort of struggled with who gets time off, and when.”

Another issue early on was the family members trying to make one another happy constantly, which was “unrealistic,” Miller says.

“We were holding hands for every aspect of the business,” she says. “But if you just sit down and say, ‘OK, who’s the person who’s really good at working the front, and enjoys that? That makes a big difference.”

The biggest problem facing family-owned businesses is the inability to separate business and family, says Bill Babb, a senior consultant with the Family Business Institute, a firm dedicated to serving the needs of family businesses.

“In other words, you got to know when you are wearing your business owner hat, and when you are wearing your family member hat,” he says. “It breaks down to the roles and responsibilities. It’s really important.”

Will von Bernuth is the co-founder of skin care product maker Block Island Organics. He runs the company with his sister Lauren and his wife, Kelly.

Overcoming the Challenges of a Family-Owned Small Business

Will von Bernuth, wife Kelly Hsiao and sister Lauren von Bernuth of Block Island Organics.

“Having been siblings for 30-plus years, there’s obviously things you do well together and things you don’t do well together, and no sibling wants to feel like the other one is telling them what to do and so forth,” von Bernuth says. “So, we also had differences in opinions on basic things, like what size the bottles should be — should they be 6 ounces or 3 ounces? What kind of pricing should they be — $15 or $25?”

Tips for family-owned businesses

Clearly define roles: It’s a smart idea to figure out who is good at what aspects of the business and use those strengths to help define roles, instead of each family member trying to do everything.

Ellen Jovin co-owns Syntaxis, a communication skills training company, with her husband, Brandt Johnson. The family dynamic has been successful for Syntaxis because the company has a clear division of labor, according to Jovin.

“We’re not constantly stepping on each other’s feet. … Brandt likes doing the technology and finance things more than I do, and I like doing marketing types of things more,” Jovin says. “Being able to designate areas so that people can have some autonomy while also being collaborative, for me seems really critical.”

Suggests von Bernuth: “Figure out which each person’s strengths are and leverage them. Then also make sure that in doing this, everyone has the same goal in the long run.”

At Peggy Jean’s Pies, Miller works the front desk and the company’s blog and social media accounts, while her mother works more behind the scenes in the kitchen.

“We had to recognize in each other, what are our strengths and what makes each other happy?” Miller says. “She’s an introvert, she doesn’t want to be at the front counter all the time — it causes her a lot of stress. I’m the extrovert — the blog and the Facebook page, that’s all me. We had to look at each other in a whole other way.

“My mom and I were very close before starting our business together — we talked daily and I really felt like I knew her well,” Miller continues. “But after working side by side with her for the past 18 months, I know her on a whole separate level.” 

Overcoming the Challenges of a Family-Owned Small Business

Ellen Jovin and husband Brandt Johnson of Syntaxis.

Communicate regularly: It’s important to have some formal framework in place for regular communication, Babb says. 

“Whether that’s a business organization, say a board of directors or a family council, it’s a formal time where grievances can be aired and be dealt with in a professional and unemotional setting,” he says.

For von Bernuth and his sister Lauren, it was important to first acknowledge that the problems existed, then communicate about how to best solve them.

“As long as we were willing to both accept that people are right in some areas and wrong in some areas, and adapt to those areas going forward … I think that can be a big learning experience,” von Bernuth says. “It can be a big struggle to get to that point, and you don’t want to ruin a relationship with your sister, your sibling, your wife, to get there.”

Create an operating agreement: If your company operates as a limited liability company, von Bernuth says it may be a good idea to also create an LLC operating agreement, which states in writing each owner’s percentage of ownership in the business, and each owner’s rights and responsibilities in the company.

“We said, ‘this is what we’re going to go after, this is who owns what, and so forth,’ ” von Bernuth says. “If you don’t have it, you’re kind of just operating on good faith, and that can cause a lot of problems between family. I believe having it upfront will help alleviate potential problems down the line. You can say, ‘you know what, we agreed to this.’ ”

Choose family over business: Always remember that the co-worker you feel like strangling at times also is family, and Miller says that through the struggles of running a family-owned business, your relationship with your relatives can grow even stronger.

“We’ve seen each other at our worst and at our best,” Miller says. “We’ve made each other cry and we’ve made each other laugh until we cried. My biggest takeaway is that I’ve been given the biggest gift by having this whole additional relationship with my mom.”

Steve Nicastro is a staff writer covering personal finance for NerdWallet. Follow him on Twitter@StevenNicastro and on Google+.

For more information about how to start and run a business, visit NerdWallet’s Small Business Guide. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

Top: Jeanne Plumley, right, and Hayden, 12, of Peggy Jean’s Pies. Photos courtesy Peggy Jean’s Pies, Block Island Organics and Syntaxis.