Ups and downs of opening a family business

By Michelle Laurey

When you think about starting a family business, you think about exceptional benefits it will bring. For example, your family’s wealth may grow, and you can enjoy working with people who you love in the process. You may love the comfortable feeling associated with making business decisions with your family members rather than with other people.

On the other hand, potential risks and issues are associated with running a family business, such as having a falling out with a loved one over a business matter. All business startups have their risks, rewards, and challenges, and you should be fully prepared for the task in front of you.

Work attitude

When you run a family business, you may notice that the culture is more relaxed. For example, you can speak freely instead of guarding your tongue at all times. A family business comes with a built-in element of trust and support, loyalty, and solidarity. Most family members will probably be willing to make sacrifices to make the business a success since a lot is at risk.

However, as wonderful as this work attitude can be, it can be taken a bit too far. Due to the relaxed attitude, some family members may put in less effort than they would with another job. They may not follow all work rules because they feel as though they are entitled to some leniency. If you promote a non-family member, a family member might get upset even if they are not the most qualified person for the job. When these factors affect a business, growth can suffer. In addition, the level of service you provide and office professionalism may decline.

To combat these potential issues, you must establish solid ground rules and ensure that everyone is devoted to completing their unique responsibilities to the best of their abilities. You also need to establish a hierarchy in your business. It is expected that the eldest lead the company, but this is not always the case. Younger family members can do as good of a job as their older siblings, but you must ensure that everyone’s abilities and contributions are respected.

The creative process

In non-family business environments, some people do not feel as though their opinions are valued or even wanted. But, in a family business, everybody may contribute their ideas. This collaboration of people from different generations and with different perspectives can be instrumental in helping the business grow and succeed.

Conversely, some family members may not freely disagree with another family member’s ideas or suggestions. While they may not believe that it is a good idea, they may want to avoid starting family drama. Another potential downside may relate to the background or mentality of people who are closely related. Everyone may have a similar way of thinking, and this could actually hold the business back in some cases.

You can combat this by ensuring that all family members participating in business activities have a voice that is heard. Focus on nurturing constructive criticism and helpful suggestions rather than potentially coming across as petty or argumentative. When necessary, disagree with the idea in a way that does not attack the individual. Give both positive and negative feedback, but always focus on work. When an individual is not completing a process or task properly, take that as a learning moment rather than a time to criticize or scold.

Combining work and pleasure

When you work with your loved ones, you have ample flexibility to spend time together throughout the day. You can have family lunches and travel for business together. More than that, you may feel as though you are sharing your professional dreams with your loved ones, and this can be a bonding experience.

On the other hand, if you and your loved ones constantly talk about business, you may actually feel less bonded. Everything about your relationships may be business-oriented, and you can lose the closeness that you once felt as a family. In addition, work disputes can easily trickle over and cause personal issues.

Everyone in the family should be focused on keeping work and pleasure separate. Any time a potential dispute arises, family members should discuss the situation and find a reasonable resolution. Issues should not be allowed to simmer for a long period of time. If you work from home, you can create this differentiation between work and pleasure by setting up a dedicated working space. The home office should be the only place where you discuss work issues. Also, leave the family matters outside.

The money talks

Financial benefits are often fabulous when you run a family business. For example, if you include younger children in the business, you could enjoy tax benefits by hiring them. You can keep most of your income earned within the family rather than having to pay for employees’ wages. In fact, you may not even have to spend the time and money recruiting and training outside workers. Some studies have even shown that family-owned businesses may outperform non-family-owned businesses and that they can create substantial personal wealth.

But, the financial aspect can also be a huge burden. Numerous people in the family could contribute some or all of their savings to the venture. If the business fails, the family’s finances will suffer substantially. In addition, you may feel as though you need to hire family members, and they may not be adequately skilled or experienced for the job. Another important factor to consider is the possibility of a divorce, which may require some or all of the business to be liquidated.

To combat these potential issues, avoid investing more of your personal funds than you can afford to lose. In addition, only hire family members to do jobs that they are skilled and educated to do. To tackle the other potential conflicts, keep everything in writing. For example, create a buy-sell agreement for shareholders, and write down the duties of all family members and other employees.

As amazing as running a family-owned business may be, you can see that there are also some downsides to consider. Being aware of those risks and knowing how to handle them is important. You also must properly identify issues as they are developing so you combat them as soon as possible.

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Michelle Laurey is a freelance writer who enjoys fitness, relaxing in the fresh air, trying to live a healthy life and daydreaming about visiting new places (and actually visiting them). Her best ideas and problem solutions appear while she’s riding her bicycle. You can reach her via Twitter.

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