Entrepreneurial relations are driving the continued growth in small startups we’re seeing this yr, following a record number of companies founded in 2023. Not only do relations start a significant slice of the recent businesses launched in the United States in any given yr, but family businesses account for 64% of U.S. gross domestic product and greater than 70% of worldwide GDP.
Even small family businesses have a big impact: they generate 62% of employment in the country and are responsible for 78% of all newly created jobs, Research shows. Of course, some family businesses turn into huge: about 35% of Fortune 500 firms are controlled by families.
When it comes to the “who” of a family business, brothers naturally come to mind. But no matter the family connection, starting a business with a spouse, parents, siblings, children, or other relations comes with its own unique challenges beyond the usual startup issues.
That’s why only one in three family businesses survives to the next generation.
The dangers could be especially acute in the start-up phase of family businesses. Relatives sometimes join in the excitement of the start-up without a clear idea of their role once the business is underway. If family is involved in your start-up enterprise, you need to be clear about compensation, exit plans, and other details before they turn into an issue.
We have devoted a lot of non-public reflection to this and have developed 12 essential elements to allow you to maintain the right balance. starting a family business.
Sales Force
AI + Data + CRM = more sales and happier customers.
Discover powerful AI that helps you connect with your customers in a whole recent way.
If you make a purchase, we are going to receive a commission, at no additional cost to you.
12 Essential Elements That Will Help You Keep Balance in Your Family Business
1. Set some boundaries
Family members involved in the business easily talk about work 24/7. However, mixing business, personal, and home life will eventually lead to an explosive mix. Limit business discussions outside of the office. It’s not at all times possible, but at least save them for the appropriate time—not at a family wedding or funeral, for example.
2. Establish clear and regular methods of communication.
Problems and disagreements are inevitable. You may already be seeing them. Consider weekly meetings to assess progress, discuss any differences, and resolve disagreements.
3. Divide roles and responsibilities.
Although different relatives could also be qualified for similar tasks, responsibilities must be divided to avoid conflict. Big decisions could be made together, but debating every small move will sink the family business.
4. Approach it like a business.
A standard pitfall in family businesses is placing too much emphasis on “family” and too little on “business.” The characteristics of a healthy business may not at all times be compatible with family harmony, so be prepared to deal with these situations when they arise.
5. Recognize the advantages of family ownership.
Family businesses offer unique benefits. One of those is access to human capital in the type of other relations. This could be key to survival, as relations can provide low cost or free labor or emergency loans. Family businesses run by trusted relatives may avoid special accounting systems, policy manuals, and legal documents.
6. Treat relations fairly.
While some experts advise against hiring relatives, doing so sacrifices one of the best strengths of a family business. Countless small family businesses would never survive without the exertions and energy of dedicated relations. Skilled relations could be a great asset to your corporation.
But avoid favoritism. Pay scales, promotions, work schedules, criticism and praise must be equal between family and non-family employees. Do not set higher or lower standards for relations than for others.
7. Put your corporation relationships in writing.
It’s easy for relations to get sucked into a business startup without a plan for what they’ll gain from the business relationship. To avoid resentment or misunderstandings, put something in writing that outlines compensation, ownership stakes, responsibilities, and other issues.
8. Don’t offer “compassionate” work to relations.
Avoid becoming the employer of last resort for your kids, cousins or other relatives. Employment in family businesses must be based on the skills or knowledge they’ll bring to the business.
9. Establish clear lines of management.
Family members, who often have a current or perceived future stake in family businesses, tend to reprimand employees who do not report to them. This leads to worker resentment.
10. Seek outside advice.
The decision-making process for growing a family business can sometimes be too closed. Fresh ideas and creative pondering can get lost in the thicket of family relationships. Seeking guidance from outside advisors who are not connected to any relations could be a great way to reality check the business.
11. Develop a succession plan.
A family business without a formal succession plan is asking for trouble. The plan should outline the details of how and when the torch shall be passed to the next generation. It should be a financially sound plan for the business in addition to for retiring relations. Outside skilled advice to develop a plan for the next generation is essential for many family businesses.
12. Demand outside experience first.
If your kids join the company, make sure they first gain at least three to five years of business experience elsewhere. Ideally, in an unrelated industry. This will give them helpful perspective on how the business world works outside of their family environment.
Running a successful family business could be each rewarding and difficult. There are 12 keys to family business success, including clear communication, a shared vision, and a strong sense of family values. Family businesses have the advantage of a shared history and a sense of trust that will help them navigate difficult situations.
However, it is essential for family business owners to set clear boundaries between work and family life to avoid conflict and ensure the success of the business. With the right approach and attitude, family businesses can thrive and provide a source of pride and financial security for generations to come.
Our summary
It’s hard enough to start a business without the added pitfalls and potential baggage of family relationships. But family businesses have some great benefits over other businesses—most notably a dedicated group of individuals willing to get behind your efforts. If your startup is a family business, you’ll need to take extra steps to avoid burnout, ensure work harmony, and get advice from business experts outside your loved ones circle.