When and When not to Jump into a Family Business

 

Ideally the start of a family business is a planned event where all the possible ramifications and risks are allowed for a a good business plan is in place. Reality is usually a long way away from this with the move to self employment being initiated by an opportunity presenting itself or a redundancy or similar loss of income. In all cases there are a few things to consider:

Firstly are you suited to self employment?

1: Do you like risk?

If nothing else self employment is an acceptance of risk, risk that you won’t make any money, risk that your idea is not actually unique and risk of losing your assets to the tax department and businesses who will ask for personal guarantees such as the banks, landlords and suppliers. It is of course a calculated risk against some big benefits like uncapped income, potential security from changes in the job market and the most cited benefit – freedom of decisions and direction. If you don’t like risk – self employment is probably not for you.

If you do have an appetite for risk, the next thing to do is understand and mitigate it, before leaping into the business document all of the identified risks and what the mitigation is.

2: Do you like hard work?

Most business people I know work many hours longer than their employed friends, this is especially true of the first few years in business before staff are brought in. Often this is a choice, people fascinated by their business want to work on it, often it is driven by there not being anyone else who cares as much as the owner e.g. the plumber who gets a call from their best customer at 2am to fix something urgently.

As staff come on board jobs can be handed out and workload managed. Also, how much time spent on the business often has quite an element of choice, while what could be done is endless, what needs to be done is often much more limited.

3: Impact on the family.

For families THE BUSINESS is sometimes always there, on the owners mind, the topic of discussions and the financial driver behind the family being able to do things. It can and often does require the efforts of multiple members of the family.

It is key that this impact is fully discussed before starting out. Discussions ideally would include:

• What exactly are the expected roles of each person – it is especially important that the non lead person understands and agrees what their role is;
• What and how do you escape? This is key for business owning couples. What time is put aside for together and family time and what rules are there around discussing the business? There should be specific times when discussing the business and time to discuss wider issues. Decide what non business activities you will do together.
• Agree that it is ok to have hard discussions. Sometimes business owners are likely to discuss sacking people you like, exiting the business and the negative impact the business has on family members. It is useful to get agreement that hard discussions are going to be had and that the impact of decisions is accepted without blame or regret, While it is useful to learn from mistakes blame and reliving problems can be fatal to relationships of business owners.

After all this doom and gloom I must say that family business ownership can be awesome! You have the chance to build something together of real worth, have a lifelong interest and build financial security and potential legacy for your family. Many business owners are faced with the troubling problem of what to do after initial success – carry on building the business or consolidating and buying the holiday home, car and lifestyle of their dreams. More on that in the next blog:

Awesome Family Businesses – What is it all about?

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