When I was a little girl, I spent a lot of time with my friend Maria and her family at their family restaurant, Belgrade Gardens. It was a family business that was started by her grandparents, the Topolskys, back in 1933. It was, and continues to be, the first real employment that many immigrants residing in the area had when they first came to this country. In fact, back in 2011, Belgrade Gardens was featured on The Food Network show “Food Feuds,” and won the “Barberton Chicken” feud.
Today, Milos Papich is the third generation to run the restaurant as it continues to grow and expand. As it turns out, however, that makes Belgrade Gardens somewhat unusual. Only 12% of family businesses stay in the family through the third generation, and only 3% move on to the fourth generation.
The Good, the Bad and the Ugly of Working With Friends and Family
First, let’s talk about the benefits of working with friends and family. Amanda Orson of NewYorkJobs.com says that working with friends and family is a great way to shorten the recruiting process. Friends and family come pre-qualified with that “know-like-and-trust” factor that’s so important to a new business.
Another benefit of working with friends and family is that you get to live through the “Rainbows and Unicorns” phase of your business together. Angie Stocklin from One Click Ventures says that the biggest benefit she got was having the shared experience of building something together.
But there’s also a downside, which can really turn ugly if you don’t handle it properly. For example, Kathy Geller Myers runs Chatterbox Communications, and decided to take her cousin on as a client when he launched a startup. That didn’t work out so well when his business ultimately floundered, and Kathy only got paid for one of the six months she worked.
Working with family brings along an important dynamic that can really impact the future of your business. Now, let’s see what lessons and advice a few other entrepreneurs have.
Communicate Clearly and Set Clear Expectations
Setting clear expectations is important, as 60% of family businesses fail because of communication issues. When you start communicating, what better place to start than with clearly stating your goals?
Tatsuya Nakagawa, CEO of Castagra Products, Inc., advises family businesses to make sure that every team member is committed to the same goals. “A business is not a family” says John Turner from UsersThink, citing that the work-life dynamics “have to change from work to home.” Craig Barbee, who runs The Bookkeeper, recommends to put the business first, and to make sure that you maintain the same hiring standards for both family and other employees.
Plan for the Future
One quarter of family-run businesses don’t make it because they simply weren’t prepared for what would happen with the business with respect to the next generation. Symone Moss, who runs Anago Cleaning Systems, said she really thought ahead and started creating a succession plan the day she filed her corporation papers.
For example, when her son Adam graduated from college, she told him to go find a job. “I didn’t just hand over the reins to him. He had to earn it, basically starting at the bottom and learning every aspect of the business first.”
Set Up a Structure for Success
Another mistake so many business owners make is expecting the family relationship to be strong enough to deal with any ambiguities that may arise in the course of running the business. This is not true!
I really like this tip from Michael Okhravi from DocChat.io, who said, “When working with your significant other, work in separate areas. It’s really unhealthy for the relationship to spend every single second together.” Even the closest of couples need time to breathe, and running a business means that those times will be few and far between.
And then there’s working with money. “Keep family away from bookkeeping,” says Ryan Hulland of Netfloor USA Access Floors. When it comes to financial issues like bookkeeping, invoicing, taxes, etc., the fewer family members involved, the better. The idea is to find a management structure that works. Brandon Baker, owner of Loveletter Cakeshop, says that you can make each family member a leader in a different department.
Whatever you do, always remember what’s important. Brent Shreve of Touch Support says, “At the end of the day it’s more about the friendships and relationships than it is about hiring practices.”
Should You Work With Friends and Family?
Remember, it’s your business. You get to decide how it’s going to run. There are those business owners who shy away from including friends and family, and others who wouldn’t do it any other way. You can be successful either way, as long as you communicate clearly, plan for your future and have success structures in place.
If you’re looking for more advice on running a family-owned business, check out our article on how to successfully transition a family business.