There are many examples of businesses that have fallen apart because of internal family disputes.
But still, there are many success stories, and the main question is why some companies fail while others succeed. Here’s information about how to run a company with relatives, gain profits, and keep the family strong at the same time.
Study the Niche
Let’s assume your wife cooks restaurant-level cakes using family recipes with a long-lasting history. Then, you decide to open a pastry shop and sell her creations. Sounds better than it is. What do you know about this business? Who are your competitors in the neighborhood? How do they work, and how much do they pay their employees? If you are not ready to answer at least one of these questions, hold your horses.
Ground analytical research is what your business needs. You may feel like you are taking to things like a duck to water because you are good at baking. But still, don’t overestimate your abilities and knowledge. If you do not have enough time, you can always ask professionals from a term paper writing service that provides complex papers such as investigation to research the local market. This step can settle your nerves and provide you with an in-depth study of your niche.
If you want to do everything on your own, then examine the field, explore new techniques and know your competitors. As Al Pacino once said: “Keep your friends close, but your enemies closer.” It remains a commonplace not only for the family business but also for everyone who sets up a company.
Sign a Legal Agreement
Have you already got an idea? Your mom, dad, siblings and uncles are ready to invest, right? On the full steam, you buy or rent the needed facility, produce and sell your first products and obtain the very first revenue. Feeling like a boss and already planning your trip to the Maldives? Here is where many businesses get crashed.
Let’s answer the question: who is going to take the first profits? Is that you? Is that someone who worked the hardest? Or, maybe, someone who has invested the most? Who will have 70 percent and who will take 30?
The troubles come, and you are not ready to solve them. What could be done to avoid such a situation? Yes, sign an agreement first! There is no matter how much you love your relatives and how much you trust them. Money is a powerful leverage and family roots are hardly enough to make them operate efficiently.
From the very beginning, sign an agreement. It will help you rule out not only the company’s mission, your business goals and perspectives but also determine shareholders, their parts, and responsibilities. This step may seem a bit redundant when everyone is on the same wave and you are just setting up. Nevertheless, it remains an integral one, especially when it comes to building a business with relatives.
Separate Bank Accounts
It is essential to create separate bank accounts for family use and company’s expenditures. Why is it so important? When you start to make a profit with a startup, you start spending more.
Frequently, companies are established using personal investments, trust funds, and retirement savings. It may seem that your company’s profits and your personal revenues are indivisible. This is a big mistake. Once you get the first paycheck, don’t hesitate to divide bank accounts. You can even pay yourself a salary, as it will ease the accountancy of your company.
Distribute the Roles
In the preliminary stages, you should distribute responsibilities among relatives and hired employees. People are prone to helping their closest ones. They often designate decision-making posts to those who have no relevant experience.
Hiring someone “from the outside” could seem a bit weird at first, but it is hardly imaginable that in one family, there are specialists to cover every business process you may have. Determining what roles you and other shareholders want to have is an essential part of co-management. Hold a meeting to confirm whether your vision of a post coincides with co-owners’ one. It will help you avoid misunderstandings.
Of course, some of your relatives may want to obtain c-suite posts from the onset even if they don’t have enough experience. Here’s a tip: develop a plan for acquiring the skills they need to be successful in the position they aspire to hold.
Business owners, especially those who are passionate about their products, usually fall into the trap of micromanaging and controlling every last detail. Such a form of leadership is still widespread, even though it leads to low employee morale and high turnover.
If you opt for gathering a strong team of managers, distribute the roles wisely to show employee appreciation, and to promote a work environment that is conducive to productivity, efficiency and retention.
A company managed by people with the same vision is the most likely to succeed. The work climate will be harmonious if you do everything right regarding the distribution of roles, shares, level of responsibilities, and profits.
Dealing with your relatives the same way as with ordinary employees is a key to success when it comes to the family business. Remember that every conflict you may have should be solved in a negotiable way. This way, you will establish lifelong channels of cooperation and a strong base for your business.
About the Author
This article is written by Kurt Erwin, a financial manager with years of experience. Kurt possesses an MA degree in Marketing and Finance. Being an expert in the field, he keeps up with the most recent industry trends. Kurt also shares his knowledge and experience cooperating with EssayPro, a professional essay writing service.