10 Things to Consider When Starting a Family Business
Family businesses require the same kind of legal, financial, and strategic set-up as other businesses, but there are several unique issues in family businesses.
Have you ever thought how great it would be to start a business with your spouse, sibling, or best friend? Maybe you want to start a business that can provide for your children after you retire. If so, you’ve probably imagined fun days at the office together, brainstorming over coffee or happy hour, and the joys of working with someone you care deeply about.
If you have the kind of relationship where you love spending every second together and you have complimentary skills, family businesses can be ideal. You get to work together, often travel together, and spend your days with the people you enjoy most in the world. However, even in those idyllic relationships, working together can be challenging. Here are some things to consider if you’re thinking of starting a family business.
- All the traditional rules of business still apply. Whether you start the business as a hobby or expect it to provide full-time income, it’s still a business. You still need legal protection, solid strategies and business plans, operational systems, and competent partners. You also need it to make money. (Nothing ruins the fun of a family business like financial worries!)
- It WILL affect your relationship. You’re changing the existing dynamic of how you relate to each other, so for good or bad, you can’t expect things to stay as they are. Learning to have good boundaries and nurturing your relationship outside of work are crucial for long-term success.
- Someone has to be in charge. Even if you plan to share decision-making, someone needs to have the final say. Disagreements are inevitable, and if you’re going to operate a real business (as in, not just a hobby), everyone needs to know who makes the final decisions.
- Just because it’s your dream doesn’t mean it’s theirs. You will most likely have different levels of commitment to the business. Whether one (or more) of you is supporting the other’s dream, or you’re all excited about the mission at the start, things change. Don’t expect anyone else to feel the way you do about your business; they’re not you and it’s unfair to expect them to be. This is especially true if you intend your business to be the legacy you pass on to your children.
- Traditional roles (CEO, CFO, COO, etc.) may have loose or unclear boundaries. If daughter #4 is the best choice for CEO but she’s the baby of the family, it may be difficult for her to manage older siblings or parents who are in support roles. Conversely, it may be difficult for the older siblings or parents to find themselves in subordinate roles.
- The learning curve may be huge. If you’re assigning positions based on potential or need instead of experience and expertise, there will be a bigger learning curve. You also may find people are in positions that don’t suit their skills and personalities, such as having a family member who hates accounting in charge of finance (“to keep it in the family”).
- You will need time off. If business is the main topic of conversation every time you’re together, you may find that you lose sight of why you enjoyed the relationship in the first place. Make sure you spend time together (and apart) pursuing hobbies and interests that are not work-related. Consider banning work talk at the dinner table or on date night (if you can!).
- Your existing baggage will be magnified in times of stress. If you’ve fought for years about how your brother shows up to everything late, what will happen when he shows up late to an important meeting? Instead of a simple disciplinary review, you may find yourself in the same knock-down, drag-out fight you’ve had since childhood. Try to leave the past in the past and focus on the present and the future.
- Mutual respect and clear communication are critical. In a non-family business you can go home and complain to your spouse about your lousy boss or frustrating employees. In family businesses, you those stressors are often at home with you. Calmly and respectfully dealing with issues when they arise (instead of letting small things build up into giant problems) helps maintain an atmosphere of professionalism that your entire company will benefit from.
- It will be fun… and it will also be hard. Have strategies in place to handle conflict, challenges, and tough decisions. If you plan for the tough times, the rewards will be that much sweeter.