How to Start a Family Business
Family businesses have a huge impact on countries’ economies. These types of companies have many advantages over single-person companies or those formed by external partners. And precisely these advantages are the reason why they succeed. A family business is based on trust, affection, mutual support, and continuity.
The members of a family business are linked by protective ties that can help them achieve the company’s goals. Another advantage is the long-term vision, since the descendants are the natural heirs and tend to continue with the business.
However, family businesses can also be difficult to manage due to the tension that the coexistence of two worlds can generate: that of business and that of family. Below, you’ll discover some elements you should consider when it comes to starting a family business.
Design a business plan
When several members of a family decide to form a family business, many questions arise about how to do it. You have to think about how to organize the company, how to get financing, what legal figure to use, etc. Undoubtedly, the many questions you have about good business governance can discourage you.
To solve all these questions, you need to design a general business plan. In other words, you need to sit down to decide and write all the company planning. This way, you’ll have clear ideas and know where to start. The first thing the family must do to start the project is to define the type of activity they’re going to carry out and clearly establish their goals.
You also have to decide how many partners will be part of the company and what legal figure you’ll use for the business. This way, you can define the social security system and the tax obligations of the future company.
It’s important that at least one of the founders of the company has enough knowledge in the sector in which the business will operate. This will allow the company, despite being family-run, to also be professional.
Define the roles of each family member
It’s essential to define the roles of each member of the family business. This is essential to avoid possible internal future conflicts, which are usually common in this type of company. The ideal thing is to create a steering committee and determine the specific functions of each member. Also, it’s always necessary to appoint a leader.
One of the bases for success of a family business consists of establishing each member’s competences, rights, and obligations. There must be respect between different generations and members for each other’s talents and abilities. The family situation of the older sibling, son, and father shouldn’t influence this aspect.
In a family business, accounts must be transparent
In any company, the issue of accounts and money is usually one of the most delicate. And this is especially true for family businesses. In this type of business in which trust and closeness reign, it’s essential for the accounts to be transparent.
That’s why it’s necessary, in this as in any company, to make a balance sheet with the help of a professional. This tool will be very useful to preserve trust and avoid personal problems within your professional relationships. By keeping your accounts transparent and up to date, you’ll protect the business and the family relationship.
Create a family protocol
To avoid future problems, especially regarding succession, it’s essential to create a family protocol. This protocol must contain regulation, succession of owners, and administrative elements.
Indeed, generational succession is usually one of the most important issues to consider when forming a family business. To ensure business continuity, you must select the most suitable candidate to take control of the company when the current leader retires.
In addition, the family protocol should also establish a conflict resolution plan. This way, when conflicts arise, as occurs in all companies, the partners will be able to use this plan to decide what the best way to solve them is. They may do so with a neutral arbitration, mediation, or evaluation system.