Are you working with friends, spouses, children, nieces, cousines, nephew etc? Then this article is for you.

Family firms account for 65% of the total 4.5 million private sector enterprises in the UK economy and are a crucial breeding ground for entrepreneurial talent and start-ups*.

Working with friends or family is a rite of passage for most small businesses. The family business sector is highly competitive with other sectors – family firms have a turnover of over £1000 billion, over double that of the private equity sector!* When you first start out in business, your family would most likely be very supportive and always ready to pitch in to help you get off your feet. This help will come in the form of motivation, funding, partnerships or even hands on backbreaking work.  This support is a blessing when you first start out and most business owners are forever indebted to family and friends as a result of this.

Thanks to all supportive families out there.

Now, the support from family has paid off and the business is doing ok. You now NEED to introduce some structure to enable your business reach its full potential. In fact your business’s survival depends on restructuring it to enable it to stay competitive in the market place. This is when trouble starts to brew in most family businesses. How do you introduce structure to relationships that has gotten accustomed to lack of accountability and freedom?

It is a difficult phase for any business but your successful navigation of this phase is vital to the growth and longevity of your business.I have worked in business with family and it is not an easy road to navigate. The challenges are unique and calls for a different approach. Below are my top 7 tips for working with friends and family: (This is by no means a comprehensive list)

1. Formalise it with a job description – From the very beginning, it is very important that you map out clearly each members role in the business. Spending some time to write job description for all parties will ensure that all business critical functions are well taken care off and everybody is aware and happy with what they are responsible for. The job description should cover notice periods and what constitutes acceptable and unacceptable conduct. It is better to disagree over the terms of contract and not go into business together at this point than to progress and fall out later on.  Even with a contract, there is no guarantee that your family will not test you! Be prepared to follow through on the conditions set out in the contract.

2. The best man should get the job even if he is not a family member – Once the business starts to grow, you need to allocate roles based on merit and not blood ties. Yes it is a difficult topic to raise but it all boils down to the approach adopted from the onset. Everybody needs to understand that it is a business and as such decisions should be taken based on the long terms benefits it will have on the business’ growth and profits.

3. Apply the same standards across board – If you have a business that employs both family and non-family members then you need to hold the family to the same standards that you hold non-family members. It is very demotivating to work in a family business where you know that progression is limited and family members will be better rewarded irrespective of what they do. It is natural that family will get better rewards but these rewards should be separate from the benefits packages that all staff is entitled to. For example, the rewards family members get should be linked to the profits or equity in the business and not blatant and undeserved employment packages for doing nothing.

4. Make it legally binding – For partnerships and other joint venture arrangement, make sure to set out the terms and conditions in a legally binding contract. Friends and family are possibly the only group that can really take advantage of us so it is very important that you protect your business from the dynamic of your personal relationships. Have an exit strategy in place for the business and individuals. The business should be set up so that it can survive any sticky situations.

Come back next week for the rest of the tips.

Illustration courtesy of Noldyx designs


Institute of family businesses

Griselda K Togobo

by Griselda K Togobo | Follow Her on Twitter Here

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