Why Family 70% of Businesses Fail? How the Right Guidance Can Make All the Difference

Last updated on: 28^th August, 2025 | Admissions | Shalu Dua, AGM - Admissions << back to blog

Published on: 25^th August, 2025

Did you know that 70% of family businesses fail after the second generation? While family businesses are marked by highly embedded trust, common values, and long-term orientation, they are also marred by distinctive challenges such as blurring of personal and business boundaries, differences among leadership, and absence of formal succession planning.

The stakes are high: not only financial loss but also broken family relationships and the loss of a legacy built over decades. So, why do so many family businesses fail despite their potential?

Too often, it is a matter of inadequate preparation and a failure of strategic vision.

Understanding the Challenges of Family Businesses

Family businesses thrive on passion, trust, and heritage, yet that is not enough to make them last. To beat the statistics, it is helpful to know why so many do fail and how risks can be mitigated. They are as follows:

1. Failure to Plan Succession

One of the most common reasons for the failure of family businesses is the absence of an enforceable, well-prepared succession plan. Without it, leadership transitions are messy, emotionally charged, and typically divisive. Where responsibilities and roles are not defined in advance, uncertainty breeds conflict and confusion.

Founders have difficulty relinquishing control, but successors are not necessarily ready or equipped. Smooth transfer depends on prior planning, systematic mentoring, and vision sharing. Having a succession timeline provides continuity while providing the next generation with the confidence to lead.

2. Conflict and Communication Issues

Unresolved differences between people can permeate business decisions, exaggerating minor differences into gigantic disruptions. In family businesses, personal and professional relationships become intertwined, and it is more difficult to settle disputes on an objective basis. Without well-defined communication systems, misunderstandings spread quickly.

Regular family meetings, open communication, and transparent decision-making are crucial. Having formal channels of communication and using neutral third-party consultants when necessary can also prevent both business harmony and family harmony. In the end, good communication shields both the bottom line and family relationships.

3. Resistance to Professionalisation

Most family firms use ad-hoc systems that, which may be right for the occasion, cannot be replicated easily on a large scale. Depending on tradition or intuition alone typically results in inefficiency and missed opportunity. A refusal to introduce outside talent or apply modern management concepts chokes off innovation and growth.

The imposition of institutional management, merit-based recruitment, and structured financial and operational systems are necessary to ensure long-term success. Professionalisation does not imply the abandonment of family values. It is to arm them with the skills to perform well in a competitive setting.

4. Not Following through on Market Trends

Complacency is a silent killer. Family businesses that are stubbornly committed to "the way things have always been done" can become outdated. Markets shift, technologies develop, and customers' expectations increase, but some organisations do not. Without flexibility, even the strongest legacy can disintegrate.

Embracing change through strategic planning, market studies, and innovation is crucial. Incorporating the next generation and their fresh perspectives and digitally native solutions into the company may rejuvenate the business and make it sustainable in the long run.

How the Right Education Can Make a Difference?

While family businesses involve unique challenges, they also involve significant potential if effectively directed through knowledge and design. With the right professional training and planning, such as that offered by the MBA Program in Family Business & Entrepreneurship course, such companies can thrive generation after generation.

Adequate education prepares the next-generation leaders to possess the competencies and the attitude required to lead and handle conflicts properly. This is essentially how the right education can assist:

1. Strategic Succession Planning and Governance

Structured succession planning is critical to business continuity. 1-year MBA programs offer hands-on training in creating family constitutions, governance boards, and decision-making structures. They professionalize the business yet preserve family values. Such preparation prevents emotional power struggles and guarantees a smooth generational handover.

2. Professional Management and Leadership Skills

Success in today’s market requires more than legacy.

Courses such as MBA in entrepreneurship give family business owners the discipline and vision to confidently lead processes and people. These skills are not only important for growth but also for motivating the next generation of professionals within and outside the family.

3. Financial Literacy and Strategic Thinking

Number literacy is not negotiable. Successors in the majority of family businesses fail due to a lack of thorough knowledge of finances. The Family Business & Entrepreneurship program, for example, provides theoretical concepts with practical information. This allows for future leaders to predict risks, manage resources effectively, and spot new opportunities for growth. This guarantees long-term stability and sustainable growth.

4. Conflict Resolution and Communication Strategies

Effective communication can prevent tensions in the family from escalating to business problems. Conflict resolution skill training, negotiation, and emotional intelligence training allow family members to confront difficult discussions and come to an agreement.

Having skills to communicate effectively, listen well, and set boundaries enhances family harmony and business effectiveness. The MBA in Family Business & Entrepreneurship prepares future leaders in conflict resolution, openness, and a culture of trust. Such values are pivotal in creating long-term partnerships and intergenerational collaboration.

How Can the Great Lakes PGPM-FBE Help?

The Great Lakes Institute of Management, Chennai, offers one full-time MBA program lasting one year, which is the PGPM—Family Business & Entrepreneurship (PGPM-FBE). This is aimed at the next-generation successors of family businesses, entrepreneurs who wish to grow their businesses, and the leaders of family businesses.

It also promotes entrepreneurial mindsets to equip future leaders to be strategic, innovative, and effective change-agents.

PGPM-FBE Curriculum Highlights

The syllabus is structured in 7 terms with 1 to 3 semesters of core courses and 4 to 7 semesters of elective courses in family business management. The outline of this MBA entrepreneurship syllabus is as discussed below:

Term	Subjects	Experiential Learning Labs
Term 1	Micro Economics Statistical Methods in Decision-making I Financial Accounting Strategic Marketing & Customer Focus I	Successful Family Businesses' Strategies Communication Lab Making Sense of Data
Term 2	Principles of Operations Management I Statistical Methods in Decision-making II Managerial Accounting Strategic Marketing & Customer Focus II	Networking with Entrepreneurs, VCs, and Business Leaders Storytelling with Data
Term 3	Business Analytics Corporate Finance Strategic Management Managing Self and People Principles of Operations Management II	Innovation Sandbox
Term 4	Professionalising the Family Business Family Business Succession Innovation Strategies for Family Business Internationalising Family Business	Knowing Self, Family, and Business Assessing & Setting Business Goals Developing the Business Plan
Term 5	Managing Intergenerational Conflicts Designing and Managing Family Offices Scaling the Family Business	Networking with Industry and Government Stakeholders Developing the Business Plan Business Launch Karma Yoga/Social Impact Project
Term 6	International Immersion	Growth Hacking Karma Yoga/Social Impact Project
Term 7	Negotiation & Influencing Law and Taxation General Elective 1 General Elective 2	The Great Pitch - Business Pitch to Investors Karma Yoga/Social Impact

Why Choose the PGPM-FBE by Great Lakes Institute of Management?

Choosing the PGPM – Family Business & Entrepreneurship (PGPM-FBE) program in Great Lakes Institute of Management serves the next-generation family business leaders and entrepreneurs for the following reasons:

Holistic Leadership Development: The program is intended to develop 360° business leadership competencies in the fields of finance, operations, strategy, and marketing.
Mentoring by Industry Experts: Receive constructive feedback through mentoring by experienced 30+ CXOs, successful business owners, and renowned faculty.
Access to Investors and Startup Environment: This programme gives you the opportunity to pitch your business ideas to venture capitalists and startup entrepreneurs.
Global Exposure: Get international exposure to the top European business schools and gain a global vision and understanding of international business practices.
Extensive Alumni Network: Join a powerful network of over 14,000+ Great Lakes alumni, providing deep connections and opportunities across many industries.

Final Thoughts

The statistics clearly show that most family businesses do not make it past the second generation. Failure is not a certainty, though. With proper planning, clear strategy, and strong leadership, your family business can beat the statistics. Great Lakes Institute of Management's PGPM in Family Business & Entrepreneurship (PGPM-FBE) is specifically crafted for the next-generation leaders of family businesses.

With a vision-oriented curriculum, seasoned faculty, and battle-tested practical experience, the MBA in Family Business & Entrepreneurship enables you to lead with purpose, conviction, and vision. Invest in your family's future with the PGPM-FBE program today.