3 Things you should know before going into business with family
It is reported that six in 10 of all UK businesses fall into the ‘family owned’ category. But before you jump head first into a new family venture, we’ve put together the top three things to consider around the pros and cons of family businesses.
Family businesses, what are the risks?
We often encounter family businesses that have not given much, if any, thought to what to do if a family member wants to leave or when it comes to selling a business, or passing over control to the next generation. This is known as a ‘get out strategy’ and it’s something that should be discussed, agreed and documented from the off.
There should be no grey areas when it comes to family business or problems are going to arise in the future. Whether it’s who takes on what role within the business, and agreeing their suitability to do so, or concern around holding family members to account over poor performance or ill informed decisions.
It often helps to seek impartial advice from someone outside of the business. A business consultant can often unearth exactly what is happening within a family business and provide unbiased advice to help get the business back on track.
But are family businesses more likely to succeed or fail?
Family businesses are not necessarily more likely to be more successful than a non family run business. As management consultants working exclusively with SMEs we do tend to come across family owned and run companies that would be more likely to survive long-term.
This is largely due to the fact that many family run businesses are not necessarily striving to be the most profitable, but are run within markets and at a level that are designed to sustain the family. We Independent organisations can be more aggressive when it comes to profit margins and market share.
That’s not to say that family run businesses cannot be run with huge success – some of the most successful businesses in the world are run by families.
Are there clear benefits for going into business with your parents?
Trust is the biggest benefit of going into business with your parents – you’ve known them for longer than anyone else and should know them better than anyone else which can give you the confidence to work with them. Equally, this can also have its downfalls as you are likely to know their shortcomings which could just as easily deter you from jumping into business with them.
We often find that parent and offspring businesses benefit from their close relationships with one another, which can see them complement each others strength and have a shared outlook and focus for the business.
Experience is another key advantage of going into business with your parents. Parents often bring experience that cannot be learnt until you have lived and worked through issues such as economic cycles or similar environmental factors that can challenge small businesses.
If you would like support setting up your new family business, don’t hesitate to get in touch
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