Starting a family-run business can sound like the best of both worlds: working with people you love and trust (hopefully!) and pursuing a shared passion. However, joining family and business requires deep consideration if you want to celebrate success together for many years to come.
Here are six ground rules to get you started.
Put together official, legal agreements. First, you’ll need to decide what type of business organization your company will be—a partnership? a sole proprietorship? a corporation? Each type has its pros and cons, so be sure to fit the legal structure of your business with your circumstances. From there, you’ll need to have a consulting professional draft any other necessary documents, like an operating agreement, by-laws, etc.
In addition to these standard papers, you should draw up an agreement describing the roles of each family member, their stake/ownership (if any) in the business, if they receive voting rights, and how they will be compensated (hourly? salary? percentage of profits?). Also include an exit plan for if a family member wants to leave the business and a succession plan. Have all final agreements drawn up by a business attorney before each family member signs them.
You’re right, this is a pile of paperwork up front, but it will save a lot of hurt and help settle or eliminate disagreements in the future.
Define clear roles for everyone. Just like you would for non-family members, create job descriptions for blood-relation partners that clearly outline responsibilities and expectations. Of course, they should be tailored to each person’s strengths! Make sure to discuss and outline paths for career growth as well as policies for shared family emergencies. Who would take over your responsibilities if you needed to step away for a while?
Aim for a meritocracy; avoid nepotism. Successful businesses reward employee performance regardless of who’s related to whom. There’s no faster way to sink a ship than to award the role of captain to someone who isn’t qualified for the position, no matter how much you love them. In the same vein, don’t neglect key resources of outside perspectives, ideas, and talents from non-family member employees. It may be nice to get discounted labor from a cousin who did well in her one design class, but that’s no substitute for the expertise of a professional. You’ll only hurt your business if you only look within the family for talent and insight.
Be logical and not emotional. It can be tough to remain objective when dealing with family, especially when you’re trying to separate your emotions from doing business! To be able to give and receive critical feedback to and from family, ask yourself how you would handle the conversation with a non-family member. Stick to facts and clear examples. Avoid becoming defensive and bringing up non-business-related situations as ammo.
Care for each other outside the office. Remember to nurture your family relationships outside business hours! Just because you see and work with family Monday through Friday doesn’t mean those relationships won’t need love, time, and work outside the work week. Have fun together, but leave the shop talk at the store. Not only will this nurture your family relationships, it will also avoid non-family employees feeling like they’re left out of important conversations that happen over Sunday dinner.