Published on March 31st, 2016 | by Ivan Widjaya0
Questions You Must Ask before Bringing Your Family into Your Enterprise
Working with family is appealing. It can work really well, but you need a few checks and balances before you start out, just to make sure you’re doing the right thing.
Do we have the same purpose?
Are you engaging your relative to grow the business, or do you plan to leave it to them? If you bring in your nephew, will he want to leave eventually, selling up as he goes? You must be on the same page or you won’t be able to make coherent business decisions together.
Can your relative do the job?
You love your sister, but is she a natural accountant? Would she be better off in a customer-facing role? Don’t let your relationship cloud your judgement – if she’s still terrible with money, it’ll be hard to sack her. It’ll also make Christmas really awkward.
Do you offer equity?
Does your relative have a share in the company immediately, or do they “earn” equity after, say, five years. Whatever you decide, formalise the agreement. Your terms must be clear.
What do we do if we disagree?
Workplace conflict is always difficult, more so when you’re arguing over a purchase with someone who set fire to your homework 20 years previously. Avoid knee-jerk reactions and negative patterns by agreeing on a referee – a trusted friend or family member (uninvolved with the business) – who has the final say.
Are your risk appetites matched?
You’re related, but your attitudes to risk may be worlds apart. You’re forward-thinking but your relative is more conservative. You prefer to stick with trusted long-term vendors while your grandson keeps showing you that year’s supply of inkjet cartridges that he found was cheaper online.
What will our roles actually be?
Family businesses that define clear roles for each member work better. This avoids squabbling siblings stepping on each other’s toes. Clear division of labour is what works. However, within families, the closeness can lead to people’s roles “bleeding” into each other. Know what your strengths, weaknesses and duties are from the start.
Can we keep work and home separate?
When working with family, work and personal life can also bleed into each other. Set ground rules – no discussing business at dinner and no family gossip at the office.
Is there an evaluation system?
One major problem with family businesses is how underachieving relatives linger in their roles. You need clear channels of feedback and evaluation. If appraisals are too tricky or awkward, you can always bring in a third party, objective assessor. Click here to read more about appraisals.
What if it doesn’t work out?
Your relative might resign or have to be dismissed. Decide how you’ll deal with dismissals or resignations. How will equity be dealt with; who will replace them? If you have a roadmap, it’s much easier.
What happens to the business long-term?
The business has to go somewhere after you both retire, but where? What happens if one of you is suddenly too ill to work, or one of you dies? It’s not a nice prospect, but again, agreeing on a roadmap is key.