5 Tips to Running a Successful Family Business
GUEST AUTHOR BLOG: Family Business Tips by Adam Toren, investor, entrepreneur, coach, and co-author of "Small Business, BIG Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right."
Is working with family a dream or a nightmare?
There are plenty of stories to support either point of view. It’s not difficult to find stories about family working relationships that have turned into bitter rivalries, and even court battles, and there are other examples of companies that have been in the same family for generations without any business — or relationship-shattering issues.
The term “family business” can cover a wide range of models. The phrase can be applied to companies from Wal-Mart to the small mom-and-pop corner store, and everything in between. These working relationships can be made up of husband-wife teams, parent-child partnerships, and, as with my brother and me, sibling collaborations. But I firmly believe that the factors that lead to successful family businesses are universal, regardless of the size of the company or the family members involved.
In most ways, working effectively with members of your family isn’t much different from working with any other business partners. My brother Matthew and I have worked together successfully on a wide range of business ventures, ever since we were in grade school. And our successful business partnership has evolved alongside our friendship and brotherly feelings for each other - not because of them. Being brothers or best friends isn’t enough to make a business partnership work. It takes an approach that encompasses some principles – listed below – that we use consistently and recommend frequently.
1. Communication is everything. Communication is the key to good relationships of any kind. With family though, it can take a little more effort, as there are often dynamics at play that make communication more complicated. We can have a tendency to feel like a loved one knows us so well that we shouldn’t have to voice our feelings or expectations. But if you want your partnership to work, it’s important to let go of these assumptions and communicate clearly and openly, just as you would with a non-family business partner.
2. Expectations need to gel. To a large extent, this point goes back to communication. Specifically, it is vital that each partner’s expectations regarding their role and those of the other partners, are communicated clearly. Again, assumptions are a killer. Lay out what each of your roles will be in the business before starting. Voice what you expect from your partner(s), and put it in writing to solidify it.
3. A formalized business relationship is best. However strong your relationship is now, you’re bound to have disagreements with any business partner. Drawing up a written agreement for your partnership (and including the expectations from #2 above) is a must. Some entrepreneurs are reluctant to take this step, as it may seem as though a written agreement demonstrates a lack of trust. On the contrary, a written agreement for a business partnership is simply good business and is designed to protect all involved parties. The bottom line is that you’re much more likely to be sorry you didn’t create an agreement than that you did.
4. Priorities are important. We all want to be successful entrepreneurs and make a lot of money, or change the world. But it’s important to prioritize your family relationships over business. It’s heartbreaking to hear of families that have been ripped apart by financial or business disputes. At the end of the day, you can build another business or make more money, but you’ve only got one family for life. Remembering that can help put disagreements into perspective and avoid the nasty fallout of a family business gone bad.
5. All-business is no fun. Although you might have a lot of fun working your business with family members, it’s important to set aside “family-only” time too. If all you ever talk about is the business, not only will your relationship eventually suffer, but you’ll drive the other members of your family crazy! Take time out from business to do the things you would do together if you weren’t business partners. Try going out to lunch or for a round of golf without talking about business at all. If you do what it takes to maintain a strong family bond, it will only serve to support your working relationship.
I love that my brother and I are best friends, brothers, and business partners (and co-authors!). It hasn’t always been perfect, but we’re very fortunate to have employed the right principles from the start, which has made all the difference.
Adam Toren is an investor, entrepreneur, coach, and co-author of "Small Business, BIG Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right."