Starting your own business with family — smart or senseless?
A lot goes into starting your own business with family. Here's what to consider to stay happy and successful long after you've opened your doors.
When we think of family businesses, we usually picture companies that have long, rich histories with ownership passed down through the generations. But all family businesses had to start somewhere.
If you're contemplating starting your own business with family, you have a lot to consider. Here's what you should think about before starting a family business, as well as the steps to take if you're ready to move forward.
3 questions to ask before diving in
First, consider: should you even start a family business? Here are some factors that should guide your decision.
1. Who will be involved?
Starting a family business isn't just about you and your business partners; other people will eventually get involved. While you may start the business with only a few close family members around you, it's important to have a plan in place for how the transition will happen and how to tell when it's time to put it into action.
Running a business will also impact members of your family who aren't directly involved in the business. You don't get to leave the job at the office the same way you do when you're just an employee. To this end, your family support system is incredibly important. Have honest conversations with everyone who would be peripherally involved with the business and make sure they're on board.
2. What is the business?
The type of business you plan to start will also impact whether it's a good idea to run it alongside family. Certain businesses lend themselves to a family-run structure better than others, particularly service businesses like plumbing companies, law firms, and restaurants, which generally allow family members to divide labour equitably. For example, if you were to start a food truck with your spouse, one of you could be in charge of food prep while the other handled the accounting.
Other types of companies, such as manufacturing operations, may be more challenging to divide up, since there are so many more roles to fill and those roles may require a high level of specialization that only one family member has.
3. Are there alternatives?
If your vision for your entrepreneurial endeavour doesn't add up to a family business, you have other options. You could consider running your business with family members as silent partners, leaving you to manage the day-to-day work. You could also take charge of the business yourself and involve your family members only as employees, not as business partners.
4 tips for starting your own business with family
If you've thought through the potential benefits and drawbacks of starting a family business and are ready to make it happen, follow these four tips to help your new business succeed and ensure your family maintains healthy relationships during the process.
1. Get everything in writing
Running a business entails making a lot of decisions. As you start yours, make up your mind about as many of them in advance as possible, preferably in writing. Settle on who will be responsible for what. Plan, too, for what happens once you reach certain milestones of success in the business ... and what happens if the business isn't successful.
Anticipating a wide range of possibilities puts everyone on the same page from the get-go. Otherwise, when the unexpected happens, say when one family member is ready to sell their interest in the business, the resulting confusion can damage the business or your relationships, or both.
2. Define roles
One of the benefits of running a family business is that you can assign roles according to each family member's unique strengths. Aim to structure the business so that each person has a distinct role that doesn't overlap with others'.
Clearly outlining everyone's place in the business minimizes the likelihood of miscommunication and hurt feelings between family members. As an added bonus, being so thorough about electing responsibilities from the outset ensures that you haven't accidentally let any tasks or priorities fall through the cracks.
3. Outline compensation
How are you and your family members going to be paid? Do you anticipate an equal split, or will some make more than others? Would an hourly wage make sense? Will each family member take a percentage of the profits quarterly? Decide on compensation before the money's actually in front of you, and again, write down whatever you agree upon.
4. Keep your work and personal lives separate
Running a business permeates every facet of your life, but that doesn't mean you shouldn't make an effort to keep the work out of your family life. Prioritize getting quality time outside of work to nurture your relationships, and during that time, try to avoid discussing the business.
Weigh the risks and the rewards
Starting a family business can be incredibly rewarding, but it can also put a strain on your relationships if you're not careful. Here, "it's not personal, it's just business" doesn't always apply. Before you dive into a new business with your family, think about what that means for you and what changes it may bring. A business has the ability to bring a family closer together, when done right — and this is just the kind of planning that will set you up for success.