Keeping Your Business in the Family? Five Mistakes to Avoid
1. Not Clearly Identifying Roles
With a family business, it’s important to clearly identify the roles of each person so there is no confusion about who is responsible for what. You don’t want tensions to arise, which can damage not only your professional relationship, but also your personal one with a relative. When roles have been predetermined, everyone will know who is accountable for the tasks at hand. You should still be able to help one another and fill in during absences if needed.
2. Not Keeping Personal and Business Issues (And Finances) Separate
Don’t let personal issues from the family spill into life at work. Do your best to keep a professional environment when dealing with the business so that there is no emotional baggage impacting the work. Try not to bring work into family life because this can impact your relationship, especially in a case where one family member has more professional authority.It’s also wise to keep personal finances and business finances separate. To help you with this, the U.S. Small Business Administration (SBA) recommends opening a small business bank account, applying for a DUNS number, setting up utility accounts in the company name, applying for credit in the company name, and acquiring a business credit card.
3. Hiring Family Members Who Aren’t Qualified
Don’t hire a family member if they aren’t qualified for the job. It’s not fair to other team members who are qualified and have to deal with working with someone who isn’t living up to expectations. This can breed resentment in the workplace.”For small business owners, it is always tempting to hire family members and they seem to be good partners in running the business,” says lawyer Andrew Taylor. “Hiring a relative as part of the business seems to be a win-win situation. It appears very easy at first since you have already known each other for years or even decades. Things can work out well since you do not need to personally adjust in the workplace. This is true if all of the family members you intend to hire are all qualified. However, it is another thing if you are hiring a relative just because he/she is part of the family—regardless of his/her qualifications.”
4. Giving Special Treatment
Whether or not a family member is qualified for their job, they still shouldn’t receive special treatment because they are a family member. It’s one thing if you are partners, but if you simply hire someone to fill a role alongside other employees, it’s important that they are held to the same standards as anyone else.
5. Not Having a Succession Plan
Any business that is to continue past the retirement of its owner needs a succession plan, but when it’s a family business, there are special considerations. Your past relationship(s) may play a role, and emotions are likely to factor in. Merit should be top mind. Ensure that the right person is really going to inherit the business, whether or not they are a family member. If you feel the family member must be the successor, do everything in your power to set them up for success and ensure a smooth transition.
Running a business with family can be a great, rewarding way to spend your professional time. It can even bring you closer together. Avoid the above mistakes to ensure this is the case. Contact one of our financial advisors today to learn more!