About two-thirds of all businesses are family businesses. More than 70% of global production is attributed to family firms. What’s more, most private wealth creation comes from successful family companies. For financial advisors, these companies often represent an untapped and extremely lucrative market. But the starting point is understanding the families’ critical concerns.

Using a study of 336 middle-market family firms, we identified four of the most critical concerns they have. These problems are often interrelated (Figure 1).

Profitably Growing The Business
About three-quarters of family member senior executives at these companies said they were very or extremely concerned about growing profitably over the next few years. Most family firms are highly motivated and determined to build their businesses. At the same time, being able to continue to grow and add to the bottom line can go a long way toward alleviating any problems that might be affecting the family or the company.

There are multitudes of ways family businesses can profitably grow. Many of them have “assets” that are severely underutilized. More than nine out of 10 of the C-level family members surveyed said the family’s collection of contacts has been essential to the success of the business. These relationships allow them to find new clients, get superior terms with suppliers and open government doors.

About 85% of these 268 C-level family member executives, however, said they aren’t monetizing their relationships as effectively as they could be This is telling. It is not that the family members running these companies do not want to do a better job capitalizing on their relationships, it’s just that they don’t seem to know how.

The opportunities for executives to greatly grow their companies and handsomely profit are regularly “buried” in their networks. What is required is a systematic approach that can uncover these possibilities and structure the situations for greater—if not maximum—effect.

Ensuring Family Harmony
For about 65% of those surveyed, ensuring family harmony is a high-ranking concern. Family discord can be financially and emotionally costly. When it leads to either outright “warfare” or even subtle sabotage, conflict among family members can easily damage the operational effectiveness of the companies. This concern is more common among first-generation family businesses than it is in those companies in the hands of a second generation.

A significant complication is that in 217 of these family businesses—places where family harmony is of major importance—nearly nine out of 10 have “bad seeds.”

These are family members—usually children—who exploit the business for personal gain to the detriment of other family members and the company. Although subterfuge is regularly involved, in time everyone knows what is going on and—at a minimum—acrimony ensues. Most times the business seriously suffers as the family tries to hash out the conflicts.

Even though everyone would like the family to work together in a supportive and constructive way, the situations become difficult when there are family members who are very self-absorbed and commonly feel entitled. They expect preferential treatment even when their knowledge and abilities are substandard and thus generally act in ways that damage the business.

Most families have a hard time reining in these disruptive and oppressive family members. But it is possible to develop a plan to eliminate, or at least mitigate, the problems.

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