Starting a business with a family member, or joining a family-run business, can be an exciting step in your professional career. Whether they’re small ventures or big-name companies, family-owned businesses represent a large portion of the American workforce. When considering whether to go into business with family, it may be helpful to weigh the rewards of the venture with the potential risks. Here are six key things to keep in mind before going into business with family.
The importance of communication
Working with family means entering a professional relationship with people you know and trust. Even so, communication is of the utmost importance. Trusting that you don’t have to micromanage the professional contributions of a family member doesn’t mean that you should forgo checking in with one another in a consistent and clear way. When families openly discuss business challenges, they’re more likely to successfully navigate difficult choices.
Boundaries and division of labor
Observing healthy boundaries between your work and familial relationships will remind you that it’s just as important to take time away from work as it is to devote yourself to building a business. Similarly, it’s important to have a clear division of labor. Knowing that everyone understands their roles, their duties, and the company’s expectations will ensure that they are performing to the best of their ability.
Working with family might mean being aware of your business partners’ strengths and weaknesses. You’ll be able to easily identify the individual expertise that each family member brings to the business and how that expertise can be best utilized. You can place family members in appropriate business roles, provide training as needed, know when it’s time for promotions, or when someone should pivot within the business to better utilize their skills.
It’s essential to be on top of necessary business paperwork. Don’t assume that someone is taking care of documentation just because the business was established before you joined or because a business partner is typically in charge of documentation. It’s important to put yourself or someone trustworthy in charge of documentation such as filing taxes or applying for licenses–any paperwork necessary for being (and staying) in business.
Personal conflicts can be a big concern when working at a family-owned business. Whether you find yourselves disagreeing in the office or at home, this can make it all the more challenging to be productive. Conflict can also make acting professionally around family members feel all the more difficult. For these reasons, it’s important to find efficient ways to resolve conflict effectively and professionally.
Succession plan and adequate insurance
Having a family-owned business can mean leaving a professional and profitable legacy. This is where a succession plan can be helpful: this business strategy will pass along essential leadership roles to the most qualified employed family members, create smooth transitions when employees retire or quit, make a plan in case of an emergency, and provide the training and skills needed to continue the business’s success in the long-term.
Along with succession planning, it’s also important to protect your business with the right types of insurance. In addition to standard types of business insurance, such as those that cover property and general liability, it can also be helpful to get life insurance for business owners, partners, and key persons. In particular, business owners might want to consider permanent life insurance like whole life insurance. This type of life insurance builds cash value over time, which you can borrow against for any reason. This includes increasing cash flow and purchasing new equipment for the business.
Having the right insurance policies in place can not only give you peace of mind when it comes to your family-run business, but also provide peace of mind for your family.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.