How to Guarantee Your Family Business Fails

I am blessed to have grown up in a fourth-generation construction company.

Consider this: 87% of companies in the United States are family-owned. These enterprises contribute 64% of the U.S. gross domestic product and generate 62% of the country's employment. They are literally the backbone of our economy.

Like the beams of a bridge that appear simple from afar but reveal their complexity up close, family businesses contain interconnected tensions that can either strengthen or destroy them. Many of you reading this have worked in family businesses and have seen both the best and worst of what they can be.

What follows is my attempt to dissect how to guarantee your family business fails, learned through my journey at Barriere Construction. While my story ended in a sale rather than succession, perhaps sharing these lessons will help others avoid similar fates. As Charlie Munger might have said, the best way to get what you want is to learn what not to do.

Before we begin: Biases litter this piece. These are my experiences, viewed through my lens, shaped by my role as both a family member and an employee. Your mileage may vary, and I'd love to hear your own experiences and insights.

The Guaranteed Path to Family Business Failure

1. Shield the Next Generation From Failure

Want to ensure your family business crumbles? Never let the next generation fail. Create safe spaces where they can't learn from mistakes. When I returned to the family business after working elsewhere, I was given responsibility for a $5 million project that ended in disaster – the general contractor sued us and we lost over $1 million. It was painful but invaluable. With tremendous support from an incredible team, I also managed a $13 million job that grew to $40 million and succeeded wildly. Both experiences shaped me more than any "protected" role ever could.

Not everyone got these opportunities to fail and grow. Some were shielded, moved between roles, or protected from consequences. This created deep tensions - how could you respect someone who'd never been tested? The anti-pattern is clear: Let family members fail early, fail often, and fail forward. Support them through the failures while letting them feel the full weight of responsibility.

2. Create Roles for Last Names, Not Talent

Here's a surefire way to sink your ship: Give jobs to family members who would never qualify for the position without their last name. Create fancy titles that mean nothing. We learned this lesson the hard way – every time we made an exception for someone "because they’re family," it backfired spectacularly.

The solution is simple: If you wouldn't hire them as a non-family member, don't hire them at all.

3. Keep Everyone in the Business (And Never Fire Family)

Want chaos? Try running a family business where everyone and their cousin (literally) has a role. Keeping underperforming family members is cruel to everyone involved. If someone isn't cutting it, firing them might be the kindest thing you can do, both for them and the business.

Beware of promoting family members beyond their competency.

I've come to believe that fewer family members actively working in the business improves its chances of survival. Think of it like a tree – sometimes you need to trim branches for the whole to thrive.

4. Maintain Fake Harmony at All Costs

This one's particularly insidious because it feels right: Never have difficult conversations. Sweep resentment under the rug. Let tensions simmer for generations. We excelled at this. Our inability to have hard conversations and address surfacing resentment – some of which predated my time – contributed to our company's sale.

Most family businesses don't end in dramatic confrontations like the ones you see on TV. They end when people simply give up, when trust erodes so completely that continuing together becomes impossible. The antidote? Create spaces for honest and uncomfortable dialogue. Better to lance the boil than let it fester.

5. Skip Working Outside the Family Business

Want to breed entitlement? Let family members step right into leadership roles without external experience. We required three years of outside work experience (though I now believe five years would be better). My time at a larger contractor in the Mid-Atlantic was transformative. At first, I was terrified I’d fail, but it turned into an education I couldn’t have gotten anywhere else. I got chewed out by superintendents, earned respect the hard way, and proved to myself that I could succeed on my own merits.

6. Ignore Non-Family Wisdom

Fast path to failure? Dismiss the insights of non-family executives. The non-family members who helped me most were those brave enough to tell me hard truths. One pulled me aside to point out how my facial expressions during family meetings showed disrespect – something I was blind to. Another urged me to communicate better. These truth-tellers are gold.

7. Make It All About Money

Want to guarantee misery? Focus solely on financial outcomes. When we sold Barriere, we achieved a significant exit that previous generations had worked hard to enable. But if money is your only metric for success, you're missing the point. The stewardship of legacy, people, and values matters more than numbers on a spreadsheet.

8. Be Family First, Business Second

Here's where intention and reality collide. We liked to say we were a "business family, not a family business." Despite strong professional management, we often made exceptions for family, bent rules we swore were unbendable, and struggled to live up to our own standards. It's easy to claim business comes first - until someone needs a job or wants to try a new role.

Professional management, clear accountability, and market-standard practices mean:

• Having non-family executives in key positions

• Making decisions based on business merit rather than family politics

• Holding family members to the same (or higher) standards as non-family employees

• Maintaining market-competitive practices rather than family-comfortable ones

9. Skip the Operating Agreement

Want to guarantee chaos during transitions or conflicts? Don't bother with a clear operating agreement. An ironclad operating agreement was created that spelled out exactly what was required of family members and what wasn't. When it came time to sell, this agreement ensured an orderly process. While none of us wanted a sale, having clear rules of engagement prevented the kind of messy, destructive conflicts that often tear families apart during transitions.

10. Maintain Power at All Costs

An easy way to stifle growth? Never let go of control. It's fascinating how difficult it is for people to step aside once they have power. The best family businesses I've seen plan succession early and execute it decisively.

11. Confuse Governance and Management

There's a line between family governance decisions and day-to-day management. Family governance handles the big questions: Should we sell the company? What's our risk tolerance? What values will we never compromise? These decisions shape the company's future and require family alignment.

But daily operations – which jobs to bid, who runs specific projects, hiring decisions – these belong to management. Mixing these two up is a recipe for disaster. Too often, family members try to influence operational decisions they should stay out of, while neglecting the bigger governance questions they should be focused on.

When Best Practices Aren't Enough

We tried to do everything "right." High-priced consultants graced our conference rooms. Family councils convened regularly. Strategic planning sessions filled our calendars. We required outside work experience, just like the Harvard cases suggested. We studied successful transitions. We listened to families who'd made it work.

We did some things remarkably well. But the best intentions and proven practices weren't enough to transition successfully from one generation to the next. The business sold on our terms to a great buyer and family relationships survived mostly intact. This was still failure, just failure with good governance.

My entire identity was wrapped up in eventually running the company. Every career decision was all in service of being ready to lead what my great-grandfather started. When we sold, it felt like losing a limb. No “best practices” prepare you for that.

But sometimes endings create beginnings. During my years at Barriere, I became obsessed with construction estimating and bidding. I saw firsthand how contractors everywhere struggled with market analysis and bid decisions. What felt like failure turned into opportunity – it pushed me to move to Nashville and found Edgevanta, where our talented team is solving many of these exact challenges I lived through.

The hardest part about family business isn't the business - it's the family. I hope sharing these lessons helps others find their path, or at least avoid some of the pitfalls we encountered along the way.

I'd love to hear your family business experiences and lessons learned.

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About the Author

Tristan Wilson is the CEO and Founder of Edgevanta. We make software that helps contractors win more work at the right price. He is a 4th Generation Contractor, construction enthusiast, ultra runner, and bidding nerd. He worked his way up the ladder at Allan Myers in the Mid-Atlantic and his family’s former business Barriere Construction before starting Edgevanta in Nashville, where the company is based. Reach out to him at [email protected]