Starting a family business is about initiating an enthusiastic adventure. It is an opportunity of creating wealth, no doubt, along with the prospect to bring the family closer. In the excitement of commencing business venture with your near and dear ones, one should not overlook to consider the following eminent elements that have a great impact on the business’s growth and progress. Here is the extract of research from different studies about the things to be considered before starting a family business.
The commencement of a family business involves deep drenching of all the consequences because not only investment but the family values, repute and binding are at stake. The best possible planning and execution is crucial. But before that certain other factors are stated significant by the experts.
1. Remember a Business is a Business
A family business above all the emotions and affection is a business first. The family business, like other businesses, requires the application of traditional business rules and regulations. It requires legal documentation, business plans and strategies, and competent partners. You are setting up a business to make money, not for the fun part only and the financial worries ruin both, the relationship as well as the business.
2. Consider Family and Business Separately
Don’t mix up the family with the business at all. As most of the members of the family are a part of the business activities too, it is not advisable to discuss the business matters at every family gathering or the dinner table. Business policies should be discussed and decided in the conference room at the business office and vice versa.
3. Obtain Expert Opinion
Before starting a family business, you would be having a strategic plan on how to take off and run business activities smoothly. It is important to take an expert’s opinion, preferably from outside the family about your plans. It is of no harm to take advice even if you are confident enough about your planning. Also consider consulting financial advisors, and attorney regarding the legal process.
You may also take the advice from an expert in case of an unmanageable state of affairs.
4. Level of Commitment should be Same
Another important factor to be seen before starting the family business is, whether all the members who are going to join the business activities are on the same page as far as the ambitions are concerned. Practically it is not completely possible to have the same ambitious dreams.
The eager of the members to achieve a specific goal or to take the business to a certain level defines how committed they will be in performing their tasks. These elements can be discussed and sorted out in pre-business meetings. Moreover assigning responsibilities according to the specialty and competence of each member also enhance the performance level. This can help to make the family business successful.
If a conflict of interest is found, no gain in commencing family business.
5. Financial Term Should be Crystal Clear
Every business is started with the intensions to make money and mostly the money related issues cause disturbance among the partners. Make sure that all the monetary terms are discussed and finalized prior to the commencement of the business. These terms should be in a written legalized form to avoid future problems.
The rights, duties, and responsibilities of the shareholders either from the family or the outside stakeholders must be clearly defined. Share of profits or losses needs to be presented in front of the partners in a proper calculated form.
6. An Incharge is a Must
Though family businesses are formed based on mutual acceptance and agreement, there must be a person-in-charge. At certain points, there could be disagreements over policies and decisions, with everyone believing his point of view is right. This is the stage where you need a person who listens to every single suggestion and argument and then decides what is the most suitable decision? For the prosperity of the business.
It’s quite a tricky position to be assigned. The person selected for such a responsibility ought to be considered the wisest, and accepted by all the members and partners of the business. Everyone should know who is going to make the final decision.
Here’s a quick recap of 6 Things to Consider Before Starting a Family Business:
- Remember a Business is a Business
- Consider Family and Business Separately
- Obtain Expert Opinion
- Level of Commitment should be Same
- Financial Term Should be Crystal Clear
- An Incharge is a Must