01 Recently, I had a conversation with a distributor boss. Here's how it went:

Q: What's the biggest challenge you've faced in all these years of doing business? A: There are two, I'd say. One was the lack of funds in the early days—I couldn't borrow money. The other was having to deal with issues involving relatives as the business grew. Everything else, in my view, wasn't a major challenge.

This distributor started from scratch and now does 300 million yuan a year in a third- or fourth-tier city. He's encountered countless difficulties along the way. The need for funds to grow is understandable, but what I didn't expect was that handling family relationships would be even harder than dealing with other difficulties!

Actually, this isn't an isolated case. Most distributors start as grassroots entrepreneurs, pulling in relatives to work together from the start—working from dawn to dusk, moving goods, delivering goods, and the more hands, the better! As the business grows, they put the father-in-law or brother-in-law in charge of the warehouse, the sister-in-law in finance, and have brothers or sisters each manage a business segment. That's how the business gets built.

Image source: Pexels

But what happens when these "founding members" who worked hard together can no longer keep up with the development? It's no exaggeration to say that almost all distributors have faced, or are currently facing, the pain of family entanglements. This is even more thorny and harder to solve than deciding which brands to expand or which channels to develop.

02 In a distributor's business, situations like the following are common. For example, you put a relative in charge of a certain area, but they lack the capability. When you bring in outside professional talent, the relative doesn't cooperate and eventually forces the talent to leave. This is very common.

Another example: a brother manages a business segment but doesn't follow orders; a sister-in-law controls finance and hampers business operations; every month, inventory counts show a few hundred cases missing, and it turns out the brother-in-law sold them off—not only sold them but also disrupted the market with low prices. Such outrageous things are not rare.

If these were ordinary employees, you wouldn't hesitate to fine or fire them. But when it involves family, it's hard to handle. "We worked hard together in the early days; what's the big deal if I take a little something now?" "We're family; you trust an outsider over me?" "Now that you're making money, you want me to leave? On what grounds?" Mixing work and family is a disaster! But there's no choice—if the business is to grow, as the boss, you have to grit your teeth and solve it.

This is a major test. If you can't pass it, you'll never grow your distribution business! Why do I say that?

03 In a previous article, I mentioned that once a business reaches a certain scale, it must shift from rule by people to relying on processes, systems, building organizational capability, and creating competitiveness. Because in the past, even a poor student could score 60 or even 80 points, but now only those who are diligent and excellent enough can pass and do well. The prerequisite for becoming an excellent student is to run the business based on commercial rationality. Family relationships easily lead to a complexity disaster, which runs counter to commercial rationality.

What is a complexity disaster? Let me give an example. The ancients advocated "exchanging children for education"—why? Because the parent-child relationship plus the teacher-student relationship creates multiple roles. Every word you say can be interpreted from different identities, making the issue complex and hard to resolve. A pure teacher-student relationship doesn't have this problem. The same applies when relatives work in the company. You talk to them from the perspective of boss or supervisor, but they interpret it from the identity of a relative. When cooperation and employment are mixed with family ties, problems become complex and difficult to solve.

This is the biggest obstacle to establishing processes and systems. When you observe a distributor, if you see that all sorts of relatives are employed in the company, you know they won't have standardized processes and systems. Such a distributor is unlikely to have a bright future—even if their current scale is not small.

Why? Because having many relatives also creates another problem: truly needed talent won't want to come in, and even if they do, they won't stay. As a business grows, it needs professional talent in various areas. But remember, truly talented people have choices; they will "choose the best tree to perch on." If processes and systems can't be established, you can't attract talent to work with you, and the business can't grow.

You might say, "That's not always true. I have relatives who do well." Of course, it's not that relatives can't do well—as long as they can keep up with development, don't hinder the establishment of processes and systems, and don't affect the addition of talent, you can recommend relatives without avoiding them. There are also cases where relatives do well in the company; it's a matter of probability. But let me offer another perspective: if family relationships don't cause problems for your management, perhaps it's because your business hasn't grown big enough.

04 New Distribution has come into contact with many successful large distributors, and on this point, they can be roughly divided into two categories.

The first category: they solved the relative problem midway through development. At a certain stage, family relationships indeed hinder further growth. The boss is forced to solve it, even if it means breaking family ties or paying a heavy financial price. Many traditional large distributors are like this—either they set strict constraints early on so that relatives don't interfere with operations, or they pay a high price to get relatives out. They shed the burden, travel light, rely on refined management, and continuously attract professional talent to grow the business bigger and bigger.

The second category: they avoided such problems from the start. Several distributors I've recently met have, in just a few years, reached heights that other distributors might never achieve in decades. Why? I found they share a common trait: they avoided the possibility of falling into a "complexity disaster" from the beginning. For example, they partnered with classmates or friends, with clear boundaries and complementary strengths; they hired professional talent, had clear processes, and used people according to their strengths. This is what I mean by running the business based on commercial rationality. They set up the governance structure from the start, have deep insights into the essence of business, rely on business frameworks to make decisions, and use digital tools to improve efficiency... We talk about the industry undergoing transformation, with challenges and opportunities coexisting. Such distributors are more likely to seize the opportunities!

Of course, these two types of distributors are in the minority.

05 Many distributors are still in the process of transformation and may be facing the problems described today. Relatives, as "founding members," have contributed to the company's development, but they can't keep up and even hinder development. What to do?

From a solution perspective, this is actually a technical problem. Either arrange a position that matches their abilities and give them adequate compensation; or give them a nominal position where they don't manage core business; if that doesn't work, give them sufficient severance or regular dividends to leave, or give them a separate business segment to run independently. If you really have to solve it, there are always methods. But why do so many distributor bosses struggle, suffer, and end up unable to solve it?

Because it's essentially a problem of the boss's mental strength. What is mental strength? It's how much you really want something and how much you're willing to pay for it! Is growing the business your goal? How much are you willing to bear to achieve that goal? Problems can be solved; it just depends on how much you're willing to bear, including financial costs and the cost of broken family relationships.

We often examine why a distributor can grow big from external conditions like models and opportunities, but we overlook that what truly determines whether a business can grow big is the boss's mental strength. Without sufficient mental strength, you can't grow the business. But mental strength isn't fixed; it's influenced by what you experience and how your cognition changes. Speaking of this, I recall something.

06 Not long ago, while on a business trip, a friend told me something in the car: There was a local distributor boss who, after much effort, built a sizable business. Of course, "when one person achieves success, all their relatives benefit." All sorts of relatives came, and along with those who worked from the early days, every department had "their own people." In terms of capability and job fit, they were definitely unqualified. Moreover, these people liked to take advantage, never considered themselves outsiders, and often embezzled. The boss knew, but out of old feelings and adhering to his "kind" nature, he turned a blind eye to some things. As a result, within a few years, the company went bankrupt. The boss was left penniless, employees lost their jobs, and the relatives scattered.

Why do I tell this story? Many distributor bosses, when they fail in the face of family, say they "can share hardships and prosperity alike," and think they can at least earn a reputation as a "kind" or "good" boss. But what is "kindness"? It's "goodwill" plus "conscience," and that "conscience" means good, correct cognition. Like this boss, appointing people on merit and running the company well—that's true "kindness," which is better for himself, his employees, and everyone, including his relatives. On the surface, this is a moral issue, but in essence, it's a cognitive issue.

Without correct cognition, what you call "good" might actually be "evil" on a larger scale, over a longer period, to more people.

So, whether you should and are willing to solve the operational problems caused by relatives ultimately comes down to a cognitive issue.

Technical solutions are easy to find, but mental strength can only be cultivated by yourself. I hope this article offers you some inspiration on the "cognitive" level.

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