They likely know you better than anyone else. At times, they've been your biggest cheerleaders, others perhaps your biggest critic. They're family, and they love you and want you to succeed. Yet should you partner with them in a business, ask them to invest in your latest entrepreneurial idea, or hire them to work for you?
According to the US Findings of the 2021 Family Business Survey conducted by PWC, two-thirds of family-owned businesses in the United States have next-generation family members working in the company.
Mixing family (or friends) and business is a delicate balance that can be tricky to navigate. But it can work under the right circumstances. Excellent communication is a must, and each person must make their requirements and expectations clear and verify they understand what everyone else requires and expects.
In this article, you'll learn about some pros and cons of working with family members as part of your team. Plus, we'll supply tips for creating a family-run business while protecting relationships, so everyone wins.
Family ties are strong and often last a lifetime. That's why many people tap into these connections and include relatives as part of their business plan.
Here are some of the benefits of having a loved one involved with your company.
While there are several reasons to bring family members into a business venture, don't ignore the potential problems you may face by having loved ones connected to your company. Keep in mind, the excitement of starting a business or the stress of running one may cloud your decision-making.
Many warnings about "mixing business with pleasure" with colleagues also hold for people in your family. And while tricky situations and people at work may come and go, challenging issues with your family and business may negatively impact your relationships and income for years.
Carefully consider the following reasons why you might avoid having relatives invest in your company, partner with you in a business relationship, or become your employee.
You may have family members who can invest in your business financially. But that doesn't mean it's a good idea to use that funding source to begin, grow, or support your company.
While loved ones may offer you money with better terms and require less paperwork than a traditional business lender, it may come with different (and challenging) strings attached. Family with a financial interest in your company may try to influence your decisions or suggest other ways to run your business.
If you don't follow their advice (and even if you do and aren't successful), their attitude about the investment in you and your business may change - especially if your business is struggling or fails. While they may understand the risk of putting money into your company, losing it may harm your relationship. They may also expect greater profits when business is booming.
If you decide to accept financial resources from someone in your family, be sure to document the transaction, ensure it's legal, and make certain that both parties understand the terms and tax implications of the agreement before signing.
You and a loved one may produce a business idea together, or a family member may be a perfect fit to join you in a business venture. But before you start a company or make a spouse, sibling, or child your business partner, be sure you consider the long-term impact it might have on your relationship.
Goals for your business may align with your partner to start. Still, you may find out that your beliefs and ideas about work, effort, risk, success, and "enough" may vary over time.
One of you may put profit first, and the other wants customers first. You may want to grow your company or take it in a new direction. At the same time, your family-member partner may be content with your current business plan or itching to move on from the business.
As your business and families grow and change over time, the dynamics of your partnership may change too. While some partnerships can weather complex changes, an exit plan is essential to preserve family relationships when you're in business together.
A loved one could be a model employee or someone you can't work with or trust. If the latter becomes your reality, you'll regret hiring a relative more than someone you don't know.
You may feel pressure or want to help relatives out by hiring them even if they don't qualify for certain positions in your business.
Suppose their skill set doesn't align with the job or their attitude or work ethic goes against your company's mission. In that case, will you be able to discipline or fire your cousin, brother, or child?
Will your family expect special treatment or compensation because of your connection?
Even if you treat everyone fairly, will your other employees perceive nepotism that may not even exist?
It's essential to understand complications that may arise with the individual or with other workers in your company should you choose to hire a family member for your business.
Root causes of some of the issues we describe above include conflict, changing life circumstances, and unclear communication and expectations.
But mixing family members and business also requires clear boundaries between work and home. Going home or spending time with family is usually at least some reprieve from business issues when you have problems at work. Yet when relatives are your colleagues or employees, there's little separation between work and family life.
If you have little choice but to rely on relatives as employees, you may also give up some level of control with your business. When dependent on family members, you have less autonomy as a business owner. You may even end up compromising on your beliefs and values to keep relatives happy and productive at work.
Now that you know some of the pros and cons of allowing relatives to be part of your company, here are important questions to answer before deciding to mix family and business. Share your responses with someone you trust who also knows the family member joining you in business and ask for their honest feedback.
If you've decided to include relatives in your business strategy, there are proactive steps you can take to plan and manage this type of relationship.
Here are six actions you can implement to help ensure your family and any business partnership works well:
While working with family can be incredibly rewarding, it also comes with challenges. It's a good decision for some relatives. Still, you shouldn't simply default to working with relatives or accepting finances from them because they're family.
Your unique family and business situation should drive your decisions. But remember: no matter who you choose to work or partner with for your business, you'll still need to keep your priorities straight and manage your own emotions and reactions to situations with care.
Think through your motivations, expectations, and plans before starting down the business path with a family member. You'll find that by being honest about where you stand and what you're looking for, you can build a sturdy foundation for success whether you include a loved one in your business plan or not.