Think Twice Before You Partner with a Family Member

written by Ivan Widjaya on May 30, 2013 in Personal Development with no comments

When you are having a great relationship with your family and relatives, it’s tempting to take your relationship to work in a business venture. However, I’ve witnessed so many relationships are becoming broken because of business-related issues. Why can things just work like the way it is when running a family business?

family business partnership

There are some answers to the question: Different business aspiration, different business principles and policies, and so on. But from what I’ve seen, heard and experience, the most typical answer to that question is… (fanfare)… money.

When you add money in the equation, you are adding a reagent into your relationship system. And money is pretty radioactive. If you can’t control it, it will wreck and destroy the whole system.

You see, your chemistry with your brother, sister, cousin, niece, etc. might be wonderful: You are doing well playing competitive sports as a team; you are very supportive when your family needs emotional support. But when it comes to business, things are fundamentally different.

Suddenly, there is a need; there is an expectation. When you invest money, you expect something in return (unless it’s a gift, obviously.) When you invest your time, energy and effort into a business, you expect your business partner (which is your family or relative) to invest comparable amount of time, energy and effort, too. Those are required to keep the balance scale, well, balanced.

But when one part weigh less, the balance scale is tipped to a side: When you feel you work harder than your relative; when you feel you follow rules but your relative doesn’t; when you do things ethically but your family doesn’t; when you envision A but your family member envisions Z; when you decide A but your relative decide Z; and so on…

In business, this will result in a strained relationship with your business partner. In business WITH family member, this is just the tip of the iceberg. Both can lead to partnership breakup, but things get murky when partnership breakup happens in the midst your family: Suddenly, things are taken personally; then potentially your other family members and relatives will pick sides; and before you know it, the whole family relationship system is tumbling down – because of this reagent called MONEY.

The bible says that money is the root of all evil. I believe that in my heart because many bad situations in the world today are the after-effect of one’s greed for money and riches. However, I believe the problem is not the money itself. The one who’s evil is the holder of the money; the one who claimed the money is hers/his.

If you are not careful with money, it can be turned into a weapon mass destruction; the reagent, mistreated, can be turned into a nuclear meltdown. It can turned friends and family into enemies, and that’s what I have witnessed numerous times.

Is there a way to make family business work?

So, is there a way to avoid disaster when you consider partnering with your family members or relatives? There are some ways, but please bear in mind that it’s a long hurdle. There are many family businesses which are thriving, but there is a certain amount of price you have to pay for that.

1. Stay away from equal partnership!

50-50 partnership seems great, but it’s not ideal. Equal partnership can also mean that there’s no majority voice in the business. If you insist on investing in a venture or building a business together with your family member, be sure that you avoid 50-50 partnership at all costs. Even 51-49 partnership is way much better than equal partnership, as the holder of 51 percent stake will have the majority voice in the business.

Just like any other kinds of business partnership, tensions will happen occasionally – that’s normal, and non-equal partnership will help you keep things in order when issues occur.

2. Prepare for the worst – even before you launch the business

Sometimes, being pessimistic about something is good; when it comes to partnership with family, you should be a bit pessimistic when it comes to profit sharing, responsibility assignments, and so on. Expect things somehow will break apart, and be sure you find the solutions to that when they did happened.

Stay away from “c’mon – we are family… why all the fuss? We can surely work things out – what could’ve gone wrong?” kind-of-talk, because things CAN go wrong EASILY when you are running a business with family member. Trust me – I know what I’m talking about…

3. Officially agree on things – in written form

And oh, one last thing: Don’t forget to agree on things IN WRITTEN FORM. Consider to hire a lawyer to help you and your partner build the best agreement, especially in the eye of the law. I have witnessed family businesses breaking apart due to the verbal agreements made by the founders: Everyone can claim something as it’s not written down and legalized it.

Remember, whether you are partnering with a family member or a total stranger, business is business – it should be run, form and managed like one.

Takeaway

It’s fun running a family with your family members or relatives, especially early on. But mark my word: When your business is starting to flourish, get ready for frictions among the founders and stake holders (remember the evil money and greed part I mentioned above?) No worries – it’s just normal. As long as you agree on everything in written form and have them legalized, everything will be under control and you are well covered.

One last word: When establishing a business partnership with your family, you should always keep things in perspective and always remember that your focus should be on maintaining good relationship with your family members and relatives. You can always fix a broken business, but fixing a broken relationship is a huge price to pay; it’s not worth it, really.

Please let me know your thoughts on this…

Ivan Widjaya
Founder/CEO BizPenguin.com


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