Making the decision to involve your family in your business can be challenging. While doing something with the closest people to you may seem like an exciting opportunity, there are many examples of people who chose this path and later regretted the decision. In order to make family companies successful, a lot of thought, planning, and organization are required.
In America, there are numerous examples of family businesses that have been successful, such as Walmart, Berkshire Hathaway, and Dell Technologies. In Nigeria, successful examples of family enterprises include Globacom and Dangote Industries, among others. Even though there are non-family members working to ensure appropriate compliance, family members frequently make up the management teams of these enterprises.
The question then is, should I involve my family in my business? What are the pros and cons of involving family in my business? What steps can I take to ensure that my business is not jeopardized as a result of this decision? In this article, we examine this topic in detail and advise on structures to put in place when deciding to bring in family into your business.
Advantages Of Family-Owned Business
- Continuity: A family business will seldom cease to be a family business, except in cases of economic crisis leading to sale or bankruptcy or similar situations. The position of each member of the family typically determines who leads the family business. As a result, leadership tends to last for a long time, ensuring overall stability within a family-run organization.
- Commitment: Since the interests of both the family and the business are at stake, family businesses tend to have a stronger sense of dedication and accountability than non-family businesses. Additional advantages result from this desire for the family and business to remain strong, including a better understanding of the market, the organization, and the work; stronger customer relationships; and more successful sales and marketing.
- Flexibility: A family-run business requires a lot of flexibility from its employees. Family members will occasionally be compelled to wear numerous hats, taking on work outside of their formal ambit if needed. In comparison to non-family firms, where roles often have very clearly defined responsibilities, family enterprises often have overlapping roles.
- Reduced Cost: The board of directors must figure out how to keep the company afloat while continuing to pay employees through economic downturns and other trying periods. But in family businesses, it frequently happens that family members are ready to make financial contributions to help the company survive tough times and also there could be a temporary reduction of salary as the goal is business stability.
- Speedy Decision-Making Process: A family-owned business is also capable of acting quickly, particularly when time is of the essence and important decisions must be made. The family business benefits from the closeness of the partners, and if everyone is in constant contact, decisions can be taken quickly and in the best interest of the whole business.
Disadvantages Of Family-Owned Business
- Pressure In The Family: Future generations in a family business may feel enormous pressure to carry on the business even if they have no genuine interest in doing so. This may lead to a staff, or even worse, management, made up of relatives who are disengaged, indifferent, and unenthusiastic.
- Disagreement Amongst Family Members: Any family-run business may experience conflict due to the relationships between various family members, family history, and the blurring of personal and professional lives. Additionally, it is frequently difficult to address such problems due to family ties. Family conflicts might divert your attention from managing the business. You may find it more difficult to concentrate on your clients, make improvements to your products and services, and expand your business as a whole when there are old disputes, long-simmering resentments, or unresolved disagreements.
- Inadequate Structure: Family businesses rely heavily on trust, but this may not be the ideal approach. It is still crucial to take regulations seriously, including internal regulations and business law. Some family businesses make the mistake of elevating family members to top management positions despite the fact that it may be obvious that they lack the education, experience, or abilities necessary to carry out their duties to the fullest.
Steps To Take If Opening A Business With Family Members
- Establishing roles and responsibilities is one of the first steps in beginning a family business. The more you can separate your job and personal lives, the less likely it is that there will be significant family conflicts. Some businesses choose to set off specified times as “no-business zones” or create guidelines that specify that discussions about the job can only take place at the office and not at home.
- A partnership agreement is another crucial step to take; even though it may seem pointless and unworkable, the fact that you have things written down helps you manage family business ties. The agreement should outline the approved structure, remuneration plans, and conflict resolution procedures, among other things. It is recommended that a lawyer or other impartial third party prepare this agreement.
- It’s crucial to maintain balance by incorporating non-family members in office administration; this guarantees proper corporate governance and reduces the likelihood of the company failing due to conflict. Additionally, family members should only be taken into consideration if they have the necessary experience for a position and not only for continuity.
Whether integrating your family in your business is a wise move depends on a number of factors which have been highlighted in this article. At inception, it is essential to ensure everybody is on the same page and to do this requires you having honest and frank conversations with all the stakeholders. Don’t launch a business merely out of desire to preserve the business within the family. A family business frequently faces more diversified and complex problems than other types of businesses so the decision must be well thought before getting family involved.
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