How to Start a Business with Family Members

Опубликовал Admin
9-05-2021, 13:50
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For many, starting a family business together is the ultimate dream. Indeed, it can be a great way to make money while also building a strong family connection. However, starting up a business is a challenging and ambitious project. In some ways, it can be even more challenging when done together with family members. Before embarking on this adventure, take steps to determine whether or not starting a family business is a good idea, and set boundaries that will help keep your business professional and your family relationships close. If, together, you decide that this is what you want to do, take steps to set your business up for success.

Determining If It is a Good Idea

  1. Have a meeting to talk about your goals. All members who want to be a part of the business should sit down to talk about the idea. It can be easy to get caught up in the excitement of doing something together without thinking about the reality of the situation, so it is important to try and be realistic.
    • Things you might want to talk about include: how conflicts, both family- and business-related will be dealt with, what kind of business you plan to have, where everyone sees the business going, who might be willing to take care of what tasks, who can invest money, or where investors will come from, etc.
    • For example, you might pose the question, “What ideas do you all have for keeping family life and work life separate?” or “How can we manage to keep family conflicts from affecting the business and vice versa?”
    • Another example question could be, “Do you guys see us growing this into a family business that can be passed down for generations, or do we want to grow a business that we can sell for a profit in a few years time?”
    • Something like this can be a relaxed, informal conversation. Afterward, it is a good idea to give everyone a chance to think about everything. For example, everyone could take the weekend to think about whether to move forward. It should be clear that nobody is under any obligation to say, “Yes” to the idea if they don’t want to do it.
  2. Make sure you are all on the same page. Before starting a business together, it is imperative to determine whether or not you all want the same thing. This can be figured out in your initial meeting to discuss the business idea. Everyone’s intentions should be crystal clear. If there is disagreement about where the business should be taken, then a compromise should be worked out and put on paper. If no one is willing to compromise, then starting a business together is probably not such a good idea.
    • For example, do all involved family members want to create a business that can be passed down to future generations or does everyone want to grow a business that can be sold in 10 years time for a profit?
  3. Think about how well you and your family members can work together. If your family generally doesn’t get along well to begin with then starting a business together is probably not a good idea. When money and jobs are at stake, clashing personalities and ideologies will only become worse.
    • Think about how your family normally works through conflict. Are the members involved generally good at listening to ideas and perspectives of each other, or is everyone constantly yelling over each other? There is no perfect family, but it is important that you learn to work together if you want to have a business together.
    • It is also important to consider the possibility that starting a business together can make or break a family. Some families come closer together in challenging times while others shut each other out.
  4. Talk with family members about the financial side. Money obviously plays a very big role in starting up a business. Money is also a big source of conflict for many families. Thus, it is important not to ignore this topic. Talk with each other about who can contribute what in terms of financial support. You should also talk about how profits will be split. You should also make a decision together about where you will find additional financial support. Nothing should be left to assumptions.
    • For example, will you look for individual investors? Will you apply for a small business loan?
    • It is important to be honest about what you can afford to put into the business as well as what you are willing to put into the business.
    • Everyone should be fully aware that starting a business is a risk. Anyone who contributes money has to understand that they run the risk of never getting any of that money back.

Setting Boundaries

  1. Don’t talk about work at family gatherings. While this may not be possible 100% of the time, it is a good idea to keep work topics out of family gatherings as much as possible. If you and a family member have a work disagreement, then try to keep that disagreement at work. As much as you can, try to remind yourself during family time that they are, first and foremost, your family. Business problems can be worked out during business hours.
    • A rule like this should be somewhat flexible. Of course, some work-related conversation may find it’s way into a family gathering. The point is to do your best to keep work issues from affecting the family bond.
  2. Don’t talk about family issues at work. Just as you should try to keep work issues separate from family gatherings, you should also try to keep family matters separate from business. This means that, while you are doing things related to business, you should do your best to keep family issues out of the conversation.
    • For example, if there is a disagreement that arises related to some area of the business, family members should not use a family-related disagreement as leverage in order to get what they want.
    • Remember this may not always be completely feasible. If there is a major family event (e.g. birth, death, marriage) it is inevitable that these events will creep into the daily conversation. Just try to not let family matters be a decision-maker for your business. For example, if you are fighting with your sister (who is a co-owner of the business), don’t make a business decision just to spite her.
  3. Decide who will be in charge of what. There are many things to be done when it comes to running a business. Deciding early on who will be in charge of what can help each family member have a sense of control and purpose. When you are starting a business with family, you might think that you can just figure it out as you go, but this is likely to lead to disappointments, misunderstandings, and fights.
    • It is best to create job descriptions that outline what the job duties are, who will be in this role, and what their salary will be for this position, just as you would do if you were starting the business on your own.
    • Try to think about who will be best suited to doing what. For example, if one of your family members has an especially bubbly attitude, and is good at working with and managing people, then they may be a good candidate for being the face of the business.
  4. Treat each other fairly. In a family business, it can be easy to take advantage of the dedication of family members, which can lead to bad feelings. For this reason, it is important to treat everyone fairly. To do this, you can lay out criteria together on how promotions, pay raises, and incentives will be given. This can help prevent family members from playing favorites because the procedure for these activities will be written in plain language.
    • Don’t expect any family member to work for free, even if they offer. For example, you may have a young cousin who offers to work in the shop for few hours each weekend. If you are just getting the business up and running, you might not be able to pay your cousin much, but you should try to pay them something.
  5. Consider bringing in someone from the outside. A business that is made up entirely of family members can get complicated quickly. Thus, it might be beneficial to have someone on the team who is not family. An outside person can bring in their own fresh perspective, and can help keep family members from bringing family matters into business matters.
    • This person doesn’t necessarily have to be a part of the business itself. Instead, you might consider hiring a mentor or coach who can help keep matters in perspective.

Getting Your Business Set Up

  1. Contact the Small Business Association (SBA).Starting up a small business is an ambitious, challenging, and (hopefully) rewarding venture. The SBA exists to help make the process a bit easier. In some cases, they may be able to help you find investors or secure a loan to get your business off the ground.
    • Even if you don’t need the extra financial support, it is still a good idea to contact them. They can offer you lots of information on getting your business started.
    • You can also find loads of information on their website. The address for this website is https://www.sba.gov.
  2. Write a business plan. A business plan is a necessary first step to starting any small business. One family member might be in charge of writing this plan, but all family members involved in getting the business set up should have an opportunity to give their own input on the plan.
    • Generally, a business plan will make projections for the next 3 to 5 years. It helps create a plan on how the business will grow and make money.
    • If you are worried about one family member putting off the business plan you can create a deadline. For example, make sure everyone has their own copy of the proposed business plan, and provide a reasonable deadline. Explain that once that deadline has passed, the business plan can be re-worked to include each family member’s feedback.
  3. Find out what licenses and/or permits you will need. Almost all businesses will require some kind of permit or license, and these may vary widely by country, state, and even city. Where you go to find this information also depends on where you live. If you are in the US, you can visit the SBA website to find links to the requirements in your state.
    • For example, if you want to open a restaurant in the US, you will need several different licenses and permits for a variety of things. If you want to sell beer and wine you will need one license, and another license on top of that if you wish to sell liquor.
    • Don’t put off taking care of this. If you don’t, you could face severe legal consequences. You can delegate the acquisition of various permits to various family members in order to help keep the work spread evenly.
  4. Find a location for your business. The right location for your business depends on what kind of business you’re operating. Think about whether you need to be visible in your community to be successful. If your business doesn’t rely on people coming into a shop, then think about what kind of location would be suitable for your business. Do you need a lot of space to work, or will a small office in an office building be sufficient?
    • For example, if you are operating a business that will rely on customers coming into a shop to purchase goods, then you will need a shop with a location that is convenient and attractive. On the other hand, if you are operating an online-only business that doesn’t require a shop that people can come into, then you may even be able to get away with a home office that family members can work out of.
    • With a family business, it may also be important to consider the proximity of the business to each family member’s home. Family members should discuss where they think a good location is, and whether that location is feasibly close enough for each family member. In some cases, you may end up compromising. For example, getting a great location may mean that one family member has to commute a bit father if they are willing to. It might also mean sacrificing a prime location so that all family members can commute each day to the business.
    • Don’t forget to think about what you can afford. If you want a prime location, you will likely pay top dollar for it. On the other hand, if you opt for a slightly more out of the way location, you might save a lot of money. It is important to weigh the cost and potential advantages in order to strike a balance.
  5. Register your business. Before you can register your business, you will have to choose a name. Choose wisely as this is the name that customers will come to know and hopefully love. Since you are starting a family business, you might want to opt for a name that reflects the family-oriented nature of your business. You will need to register your business name, which will be called a “Doing Business As” (DBA) name.
    • Not all states require a DBA. You can find this out by contacting your county clerk. If you don’t know the contact information of your county clerk, try doing an internet search for “county clerk” plus the name of your town or county.
    • If you are starting a family-run accounting company, you might call it something that incorporates your family’s last name or names, for example, “Smith, Price, and Associates.” If you are starting a bakery with a cousin, you could call your bakery, “Two Cousins Bakery.” You can be as creative as you like, but making the family aspect apart of the name can be appealing for some customers.
  6. Develop a succession plan. It may not seem that important when you are just starting out, but creating a written succession plan together with family members will help avoid later misunderstanding and feuding. The plan should explain clearly how, when, and to whom the business will be passed down.
    • It is also a good idea to include information in the plan about who the business should go to if the successors don’t want to run the business. For example, is it OK for the successor to sell the business or should the business then be passed on to a family member who does want to run it? You may not end up with much control over this in the end, but it still is a good idea to make the founding family member’s wishes clear.

Tips

  • Keep the lines of communication as open as possible! Many arguments and misunderstandings occur simply because someone failed to communicate a bit of important information.
  • Remember to enjoy the time spent building your business together. Family members won’t be around forever. Working on a mutual goal together will provide lots of meaningful time spent with one another and many memories to enjoy.

Warnings

  • Starting up a business can be time-consuming and stressful, and can be even more challenging when done with family members. If you already have a tense relationship with your family members, starting a business together may be extremely difficult.
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