“Family business” doesn’t always mean a mom-and-pop operation. The reality is that many of the world’s most successful businesses are family businesses. For example, Facebook is a large, global, public company, but it’s also a family business with the Zuckerberg family still owning nearly one-third of the enterprise.
Regardless of scale or stage of life, a quote from Charles Dickens sums up my feelings about family businesses: “It was the best of times, it was the worst of times.” Oh what a conundrum is family business: Should I or shouldn’t I? While there really isn’t a right or wrong answer to this question, the following five points should be kept in mind when considering whether to invite family members into your business:
01 Think It Through
Family should be about unconditional love, security, and continuity of relationships. However, business can quickly devolve into a nasty quagmire of conditional relationships, greed, and ego. While business interests and family relationships can successfully coexist, the conflicts of interest can often be terminal. If you cannot live with the possibility that things may not turn out on a positive note, then I would strongly advise caution about including family members in your business venture.
02 Seek Alignment up Front
It’s easy to assume that family members should all have the same values, but that is not always the case. Don’t just assume your family members share your values; confirm it prior to their inclusion in your business. While it is certainly easy to involve family members in your business, parting ways is rarely easy, and usually comes with more than its fair share of emotional turmoil. Spend the time up front to align expectations and talk through all the “what ifs” surrounding family involvement in the business. Spend more time talking about what happens if things don’t work out rather than the upside of potential success.
03 Document Everything
There is a tendency to believe that since you’re dealing with family, there is no need for formal business agreements. Wrong! Document everything when it comes to dealing with family members so that in the event of a dispute, sound business logic and prudent governance will prevail over emotions, revisionist history, or flawed memories.
04 Keep Things Close
While family should be family, this assumes value alignment, right thinking, and prudent behavior. The reality is that your chances for success in family businesses rapidly diminish the further removed you are from your immediate family. While there are certainly exceptions, the harsh reality is that your immediate family members are much more likely to remain loyal in good times and in bad times than nieces, nephews, cousins, or in-laws.
05 Don’t Give Anything Away
My thinking on this topic applies to responsibility, titles, compensation, and ownership interests. In general, I have found that people just don’t value something they have not earned (this can be particularly true of family members who display a sense of entitlement). The goal here is not to make things unduly difficult on family members, nor is it to make money off of family members; rather, the goal should be to teach them that along with the privilege of ownership comes requirements for investment, risk, responsibility, and commitment. My son worked outside of our business for more than a decade, and when he entered our business, he didn’t start out as CEO. He earned his way into that role.