There are 10 million family owned businesses in the United States with 50% of the Gross National Product coming from them.  They make up 37% of the Fortune 500 and represent the fastest growing sector of the economy.
American Family Business Institute-Arthur Anderson-Mass Mutual Survey.  1997

Eighty percent of businesses in the United States are family owned.  This startling number is a clear indication of the desire for individuals to have more independence and perhaps for families to work together.  If a family is prepared for the difficulties inherent in working with those they are emotionally linked to, the benefits can be many.  Unfortunately, most who enter business with family involvement are naive to the affects of business mixed with blood.  Many family businesses deteriorate into inefficient, emotionally painful and destructive place to work.  The numbers are sobering as only 30% of family-owned businesses survive to a second generation and 13% to a third.

The paradox... One irony of family business is that often the same characteristics that lead to their success are the very ones that lead to its demise.  The characteristics that seem to have such positive upsides, and at the same time significant downsides are:   family "trust," founder independence and tenacity, and extensive product knowledge.

• When a family is cohesive and functional, it will tend to create a business with the same 'culture.'  This unusually trusting environment, where employees are 'part of the family,' can lead to much higher productivity and efficiency.
    

• Most founders are hard working, tenacious and independent individuals, all attributes that are a significant benefit to an organization during the tough early years.
    

• Most founders are well schooled in the industry, product and market in which they operate in.  The advantages of such knowledge are obvious.

Unfortunately, these same characteristics can contribute to problems as well. 

• A family business may be so 'trusting', that structures are not put into place to guide employee behavior....decision making 'due diligence' may not consistently occur which can lead to inadequate deliberation on important issues....family members selected for leadership positions may not have the skills or experience to fulfill such important roles, but are slated for such roles regardless.  Too high 'trust' can lead to major blind spots.  Business decisions can be made based on family emotions, not business rationality.

• Similar disadvantages surface when we examine how the founder's characteristics affect the organization.  Rigid independence may prevents a founder from seeking outside assistance when a situation warrants it thus a small problem can develop into a major crisis.
    

• Owners who believe that industry knowledge alone can lead to company success, will not invest in the expertise required to run the entire operation.  Many times, marketing, financing, operations and management are not developed fully to support a growing company.
    

• While a founder's dedication to the company is expected and often required in the early stages of a business,  that same devotion over the long term can create enduring problems in the family.  When dad or mom does not have the time to be husband, wife or parent, the affects on children may lead to resentment that stays with the family for the generation. These pent up feelings can manifest in destructive ways in the organization and can alone lead to its downfall.