Some of the best businesses around the world are owned and operated by families. These big-name companies often started out as small ventures, and they prove that working with relatives or friends can be enormously successful if you approach the opportunity the right way. If you are considering starting your own company with people you love, evaluate these points to see if moving forward will serve everyone well.
First, starting a business with friends or family will change your relationship with them. During working hours, you will need to interact with each other a little more formally than you would if you were just hanging at home, especially if you’re co-helming a team of employees. Communication between leadership members is key for any budding business. If your new business partner is your brother for example, over communication is key to ensure all aspects of the company are being managed properly. Clearly define your job titles and responsibilities at the outset of your venture. It will ensure that your organization runs smoothly, and it minimizes the risk of confusion, and even power struggles, as your business scales.
The most common mistake made is building a business on promises. Laying out a strategic map for the next 1 to 5 years of your business’s life is crucial for any kind of venture. But when you start a business with your best friend—and you’ve had the necessary, preliminary conversations ensuring that you’re on the same page about this thing—you might think the strength of your word and a formal business plan are mutually exclusive. When you are forming your business, sit down and discuss roles, responsibilities and pay, and once you reach an agreement, finalize it in a written contract with the help of a lawyer. A legal exit strategy is just as crucial as creating a business plan. Separation and buyout clauses that protect both parties can corral chaos into order and it ensures, as much as possible, that the failed business doesn’t ruin your relationship as well.
Everyone needs to be clear on the required time commitment for both the short term and the long haul. If you have ambitions to start a nonprofit or scale the company globally and your partner would like to keep the company local, you will need to have other members chime in and advise on what will work best for the company. A neutral third party that hasn’t been connected to you or your family members can step in and be an arbitrator. Find someone you and your family member both trust and then make sure they understand what role they’ll play in mediating any disputes. They can work out any differences based on what you’ve initially put in writing, and they can remind you that the most important thing in or out of business is the relationship.
To ensure your company will be a successful family-owned business, address these questions at the start of your journey. If everyone is clear about the goals and mission, you can create a legacy and profits for generations to come.
Allan Draper is a business growth expert, entrepreneur, attorney and host of the successful podcast, “The Business Growth Pod.” He specializes in scaling businesses and helping entrepreneurs reach goals with a dedicated approach to business analysis. Allan has contributed to the growth of startups that have now become multimillion dollar enterprises. He also launched and grew the national company, proof. Pest control with his brother.