Operating a family business presents additional obstacles (along with additional opportunities) to entrepreneurs.

Relationships are put at risk on a professional and a personal level as work/life boundaries become blurred. Often family members know the right buttons to push and disagreements can easily escalate. Additionally, financial risk may be intensified in a family business if both family incomes are from the same pot.

For some, the advantages of being in business with family outweigh the disadvantages. Working alongside people you know and trust and generating family wealth can be very rewarding.

Before starting a family business, ask yourselves some questions:

  • How healthy is your relationship now? You have to have a good foundation from the start or you risk offending your family member very quickly once they see you in your work environment.
  • How will performance be evaluated? You can’t talk to a spouse the same way you would an employee, particularly when you end up going home together. Giving a performance review on a project or longterm can be a tightrope act to say the least!
  • What will the compensation plan be for family members? Will you be able to pay your nephew or niece the same as you would another employee and not get the tap on the shoulder from your brother or sister (in-law) about how they should be getting more because “we’re family”?
  • Develop a policy for additional family members joining the team – This becomes extremely important around succession discussion. Can one of your children who has been a manager at another business come into your business as you retire and have a higher position than the other child who has been with you the whole way through?
  • Outline roles and responsibilities – Just as you would for any other business partner, outline who will be handling which aspects of your entrepreneurial venture. Who will manage, who will handle all accounting duties. Having everything on paper will help you greatly as you move forward.
  • Develop a decision making framework to have corporate governance on strategic decisions – Both you and your spouse may be partners or co-founders of the business, but based on past experience you may want to determine who is better at strategic planning and have him or her lead this aspect of the business development.
  • Develop a process for dispute resolution, including when to bring in outside advisors – They say you should never go to bed angry; but you shouldn’t leave the office angry at each other either (even if the office is just down the hall from your kitchen). It’s key to leave work at work, lest your relationship suffer as a result of arguments during business hours.

If you are already in business with family some important things to remember are:

  • Commit time outside work for fun – We all know that entrepreneurs work longer hours than most, but it’s important for “co-worker” you to be different than “family member” you. Make sure you and your family have downtime a plenty!
  • Avoid keeping score – Tally boards for real estate agents may motivate one another to stay competitive, but that doesn’t work for husbands and wives. Compete against other businesses, not yourselves!
  • Recognize each others’ successes – Just as you would reward an employee for a job well done or scoring a major account, do the same for your son or daughter. Don’t assume that they don’t need a good pat on the back just because they’re your kids!
  • Communicate Communicate Communicate – Sounds like marriage advice, doesn’t it? It should because you’re in a committed relationship here too! Think of the key to your office as your wedding ring, and use marriage tips as a model for operating your family business.
  • Formalize a succession plan – We talked about this a bit earlier, but there is a lot to be gained by formatting a proper plan for who will take over the business when you’re ready to retire. The key question to ask – do you want to keep the family business going, and do your family members want to, will you dissolve it or will you put the business up for sale.

For more business plan tips, call Beal Business Brokers and Advisors today at 204-478-7266, or fill out our online contact form here.