Starting a family business can be exciting, fun, and also comforting in the fact that you know your colleagues better than most. It does present a few unique challenges, however. Family support may be offered without a second thought at home, but when it comes to relentlessly chasing down customer payments, can you really rely on your sibling to bring in the money every time?
Here are a few dos and don’ts for starting a family business to ensure the highs are more memorable than the lows.
What to do when starting a family business
Protect the family wealth
Setting up the family business as a limited liability company offers protection for you and your family on a personal level. The business becomes a separate entity in law so if any lawsuits are brought, or business-related legal issues occur in the future, in most cases your home and personal wealth will not be at risk.
Document roles and responsibilities
Agreeing and clearly defining the roles and responsibilities of every family member taking an active part creates a framework for a successful business. Basing it on skill, character, and past experience, rather than the family ‘hierarchy,’ also reduces the potential for day-to-day conflict.
Set up regular meetings
Regular family business meetings where everyone’s opinion is heard are the ‘glue’ that holds everything together. Meetings could be held weekly or even daily, but over time, this form of open communication overrides a family’s natural tendency to default to family dynamics where some family members won’t be heard.
Hire external advisors
Hiring at least one external professional advisor is crucial when running a family business. They provide a broader perspective on what is working in the business and areas that need to be changed – a factor that isn’t always obvious to the family who are too closely involved.
Develop a succession plan
Even though you’re just starting a family business, you should think about the long-term future and how you would exit if you wished to retire, or perhaps wanted to try a new venture. Formulating a succession plan can be a complex process, but developed over time, it protects the business and the wealth that’s been built up over the years.
Don’ts for starting your family business
Fall prey to family dynamics
It’s so easy to fall into the ‘family dynamic’ trap whereby one or two family members assume a leadership role whilst others take a back seat. It may come as a surprise to find your younger sister is a better manager than you, but roles should be based on talent rather than a person’s position in the family.
Employ people just because they’re family
Similarly, employing family members just because they’re related compromises business success and threatens to cause discontent amongst others brought into the business on merit.
Forget to set boundaries for business and home life
Running a family business is a fantastic opportunity, but be sure to talk about subjects other than work once you’ve finished for the day. If work isn’t the only topic of conversation at home or when you’re out and about, it’s true to say that family life should remain fresh and interesting.
Make decisions unilaterally
Unless you’re given free rein to make changes in the business without consulting others, don’t make unilateral decisions. It creates the discord and hostility that can be noticeable to customers, and subsequently affect business sales.
Family values often make a business stand out from its competitors. The caring nature inherent in most families is a unique trait that sets the business apart, encourages customer loyalty, and therefore long-term success.
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Written by Keith Tully; partner at www.realbusinessrescue.co.uk – part of Begbies Traynor Group plc. Keith has more than 25 years’ experience writing for a range of publications on business matters including raising finance, insolvency and HR issues to name just a few.
