Covid-19 challenges the value systems of family firms and urges them to adapt their behaviors, affecting their identities. This study aims to explore how and why family businesses strategically respond to challenges to their identity during Covid-19. Based on a qualitative case study of six German family firms, we propose a process model of family business identity variations during Covid-19 with three propositions, highlighting the interplay between strategy and identity. Counterintuitively, we found that an exogenous shock like Covid-19 can have a positive effect on family business identity, leading to identity clarification or consolidation. We contribute to the growing stream of research investigating the impact of Covid-19 on SMEs, as well as research on family business identity heterogeneity and organizational identity literature by illustrating the interplay between strategy and identity.