Family Business account for over 80% of all US businesses, contribute 50% of our Gross National Product and provide half our workforce. However only about 10% of family businesses make it to the third generation due to the unique challenges family companies encounter.
Starting a Venture with your Family …
There are certain advantages to starting a family venture:
– Initial costs and losses are easily shared.
– Later success benefits the family as a whole.
– Enables the family to be together.
– Family may trust each other more than outsiders.
However, there are many challenges which come up during a start-up venture that need to be addressed:
Tips for Spouses jointly running and starting a business:
– Follow business rules; romance is for non-business hours.
– Clearly define each spouse's role.
– Accentuate each other's talents.
– Keep business and personal life separate- understand the inherent conflicts of interest.
– Set strong ground rules and understand you will not always agree.
– Define your expectations specifically and clearly.
– Set aside family time.
– Involve young family members in the business for fun, short tasks and jobs.
– Have a system for recognizing and rewarding hard work and accomplishments of family.
– Understand clearly what the business relationships of Family are.
– Have a solid Business Plan which clearly defines the company structure, responsibilities, roles, strategic direction and so forth.
– Clearly identify who is the lead entrepreneur.
– Identify the strengths and weaknesses of each family member.
– Understand each family person's business experience and background.
– Establish how much money each family will contribute.
– Agree up front how equity will be divided.
– Honest and clear communication between family.
– Professional, business environment and structure.
– How and where non-family will be incorporated into the venture.
If You Join an Early Stage Family Venture …
Advantages for family persons joining a new family venture are numerous:
– Family can help and are inexpensive during the development period.
– Family wants the opportunity to help the business as it benefits the family as a whole.
– Flexible hours, days and pay are attractive to family member initially, using minimum resources.
– The business brings family back together.
– Family members Join the family venture because they are frustrated with their current work place and environment.
Issues to consider for an early stage family Venture:
– Largely interpersonal issues. Experience role reversals.
– Resentment can build if a family member is not adequately challenged and rewarded.
– Issues relating power, rivalry and jealousy are common among family members.
– Take in consideration a family member's personal interest, skills, experience and training when assigning areas of responsibility.
– Define, exactly, each family member's area of responsibility.
– Define who each family member is accounting to, as well as, for.
– Determination compensation structures- salary, bonus and equity stakes.
– How will a disagreement be handled?
– What will be done if a family is not contributing?
– If …