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Family Manufacturing Business Minnesota

10 Challenges Faced by Family Manufacturing Business

Every business organization has a unique set of challenges and problems.


The family manufacturing business is no different. Many of these problems exist in corporate business environments, but can be exaggerated in a family business.

Family-owned manufacturing businesses go through various stages of growth and development over time. Markets rise and fall, economies change, and demand can be unpredictable. But, many of these challenges will be found once the second and subsequent generations enter the business.

A famous saying about family owned business in Mexico is “Father, founder of the company, son rich, and grandson poor” (Padre noble, hijo rico, nieto pobre). The founder works and builds a business, the son takes it over and is poorly prepared to manage and make it grow but enjoys the wealth, and the grandson inherits a dead business and an empty bank account. This is particularly true in manufacturing businesses that have lineage involved.

So, let’s take some time to prepare now and help your grandchildren avoid the poorhouse.

10 challenges for the family manufacturing business:

  1. Emotions. Family problems will affect the business. Divorce, separations, health or financial problems also create difficult political situations for the family members.
  2. Informality. Absence of clear policies and business norms for family members can get especially messy when machinery, inventory management, and day-to-day operations are involved.
  3. Tunnel vision. Lack of outside opinions and diversity on how to operate the business can be especially damaging when hard issues need to be discussed.
  4. Lack of written strategy. Not having a documented plan or official long-term strategy as an objective reference can leave a manufacturing family to their own devices – which spells disaster for both the family and business.
  5. Compensation problems for family members. When dividends, salaries, benefits and compensation for non-participating family members are not clearly defined, natural friction tends to occur.
  6. Role confusion. Be it in the office, or on the production floor, if roles and responsibilities are not clearly defined within the family and reiterated regularly, conflict can arise within an organization
  7. Lack of talent. Hiring family members who are not qualified or lack the skills and abilities for the organization often leads to an inability to release them if they do not work out.
  8. High turnover of non-family members. When employees, especially on the floor or in operations, feel that the family “monarchy” will always advance over outsiders, this can lead to employee dissatisfaction and, in most extreme cases, a mutiny or walk off. This is incredibly common in manufacturing businesses.
  9. Succession planning. Most family organizations do not have a plan for handing the power to the next generation, leading to great political conflicts and divisions.
  10. Retirement and estate planning. Long term planning to cover the necessities and realities of older members when they leave the company is a key pitfall for many manufacturers. Most retirement planning becomes improvisational and impacts morale for the next generation of ownership!

Thankfully, KeyeStrategies has a long history of working with family-owned manufacturing companies to help ensure these problems don’t persist! Julie often works with owners, shareholders and family members to create a culture of good communication, honest mechanisms, and transparent strategies to help the long-term success of these types of businesses.

Let us know if KeyeStrategies can help you.

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Julie Keyes
Julie Keyes

Founder & Owner at KeyeStrategies, LLC

Julie is a Certified Exit Planning Adviser and Value Growth Advisor with 30+ years of experience. She works with business owners who seek to understand and maximize their exit and critical transition options.