One of the challenges in dealing with family centric businesses is the balancing act between family wants and business needs. Frankly, I try not to deal with family centric businesses for this very reason although I’ve had family members join an existing client and suddenly, I have a family business client. Results are mixed at best. Rarely do family members join solely because they were evaluated against a pool of existing candidates and were deemed the best.
I only recall one time when I was asked to give a fair evaluation of a family member. Her early background reminded me of my own in that she worked for a multi-national corporation. She was clearly capable so the question was whether she wanted to make the shift to a much smaller family run business. It would take an investment of company resources to help her make the transition. I told this to the CEO who was her father-in-law. He said he was willing to make the investment. She came on board and performed well. This isn’t the only time I have seen it work, but the success stories are few and far between.
Too often, however, family members are brought on board for different reasons. This can range from the acknowledgement that they are struggling to perform in their current role outside of the family environment to the genuine belief that they can help. Even in this latter case, however, family members are usually held to a different standard than the rest of the workforce (if they are held to any standard at all). I have seen lack of effort, excessive pay, incredibly liberal vacation schedules, and a general sense of entitlement. Non family members either end up picking up the slack or watch things slip through the cracks. Either way they take note and are typically resentful. Sometimes it is the reason they move on.
The other huge problem in family centric business is cash flow planning (or lack thereof). While some families understand that the business generates a certain level of cash flow and plan their lives accordingly, others view the company as a piggy bank from which they can draw whatever amount of cash they want regardless of business circumstances. I’ve gotten calls from the accounting team telling me that they were told to distribute over $100,000 for one reason or another despite the company being tight on cash. I’ve seen businesses stacked with debt and living under extreme cash pressure as the company makes regular distributions to support lifestyle and family members. Needless to say, I end up having very direct and uncomfortable (for the owners) conversations.
Family members hired into a business should be held to a higher (not lesser) standard and should have experience outside of the family business (“in the real world”) first where their last name is meaningless. Only then can they add value. Their compensation should reflect the market rate for the position, not their family status or the love of mom and dad.
The finance team should be responsible for cash flow planning. Distributions should be based on company cash flow, not the sudden urge to take a luxury vacation or remodel the kitchen.
In the long run, putting business needs first will be best for the family. It can be hard to get them to understand this fact.
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (513) 225-8657 or send an email to [email protected]
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your cash is flowing. know where.®
Ken Homza
Copyright @ 2026 Kenneth M. Homza