Family-owned businesses are everywhere. Some can thrive and turn into multi-billion-dollar corporations, but they all start with something as small as a great-grandfather’s timber stairs business in New Zealand or a grandmother selling some processed food at the local market. Many families have succeeded to the point that their businesses are still run by their children and grandchildren.
Before you follow the footsteps of successful family businesses, make sure you have a solid plan. Here are some important factors and tips to bear in mind:
Your Preparedness for Running a Business
You might be prepared for the emotional toll of running a business, but are you prepared for everything else? As the business owner, you need to be persistent and focused on your goals. Gaining profit might take years and inability to manage the risks will make things more difficult.
Do a lot of market research. See if there’s a demand for the product or service you’re planning to offer. Hire consultants to check if your business plan is viable, consider the initial size of your company, learn about your customer profile and price points, and make sure you can pay back the business loan you’ll take (if you’ll apply for one).
Preparing Your Family
Starting a business with your family also means managing your relationships. Defining the roles of family members in the business will reduce the chances of alienation and conflict. Even with a family board, conflict is likely to occur. Like in any other workplace, be careful when establishing lines between your personal and professional lives.
In addition, be fair when assessing the skills and personalities of family members who wish to participate in the business. Even if they’re your first cousin, they’re probably not the best candidate for the job if their skills are not up to par. Siblings who don’t play well with others may also pose a great risk for your company if they can’t set their personal woes aside for the business. “Sympathy” jobs may seem like a charitable act, but it’s only going to spell trouble for your company and the family member you’ve employed.
Be frank when you’re discussing the risks to your loved ones. Starting a business can cost thousands of dollars. Before you pitch the benefits, prepare your family by telling them the risks of losing their investment. Aside from securing funding, you can check which of your loved ones are prepared for the downsides of running a business.
Don’t leave any aspect of the business on handshake or oral deals. Keep all business-related transactions, agreement, employment, and other deals documented. Even with your family involved, you need a solid paper trail for legal and tax purposes.
Remember: Family First
Frustrations can run high in business settings and conflict is always a possibility. However, remember that the people you’re running the business with are the same people you’ll meet at your family reunions and holiday dinners. Just as you treat your non-family members with respect and honesty, extend the same courtesy to your loved ones. If possible, hire someone outside your family as well. An outsider’s perspective can help keep the train running.
If you’re on the older side, create a logical succession plan that will see your family business thriving under the leadership of the younger generation. Learn to keep family dynamics outside of your company while taking advantage of the inherent trust and security of handling business with people who share your name or blood.