Starting and running your own family business can be difficult. Not only do you worry about the logistics of creating and selling a product or service, but you also worry about keeping your family members happy and cohesive as well.
Keeping all of them in mind, there are some things you should do when you start or inherit a family business, no matter what field it’s in. Here are five essential things every owner of a family business should know before starting their business to keep it running smoothly and make sure everyone stays happy along the way.
1. Establish Good Documentation
Any business that involves transactions between two or more parties (and most small businesses do) will benefit from having documentation on file. The majority of businesses in America are structured as sole proprietorships, limited liability companies, or partnerships. These companies don’t have employees; instead, all income is distributed to owners and taxed at their rates. Good documentation can ensure that your business taxes are filed correctly or even allow you to take advantage of tax deductions when eligible.
2. Assign One Person as an Owner
What you don’t want to do is have more than one person own your business. If someone dies, it can lead to a lengthy court battle—that’s assuming you can get any value out of it at all. So make sure you decide who will own what percentage of your business. The other thing to consider here is what happens if you and your spouse or partner disagree on how things should be done.
It can lead to infighting and lots of stress. Imagine going into work every day dreading seeing your co-owner because you know they’re not pulling their weight. A better approach would be to keep ownership separated while allowing both parties a say in significant decisions. This way, you won’t feel like your interests are left behind, but you also won’t have to worry about drama as much. You must protect yourself and your family before anything else.
3. Allocate Resources Properly
Keeping everybody involved, updated, and informed is an important task when you own a family business. One of the best ways to do that is to allocate resources appropriately. Different tasks require different types of resources, and spreading yourself too thin will make it difficult to focus on what’s important.
Everyone should know which type of resource they need—money, time, data—and allocate those resources accordingly. Managing communication issues early on can help keep your company running smoothly later.
4. Retain a Lawyer
Make sure you’ve got some legal help lined up. Although you don’t need to hire a lawyer for day-to-day operations, having one on retainer allows you to get expert advice when things get sticky. If your company is publicly traded or registered with any government entities (like FDA), then keep in mind that a lawyer who specializes in those fields may be necessary.
If you and your spouse both take ownership of the business, it might also be helpful to consult divorce lawyers in case things get acrimonious in the future. As with all startups, there’s a lot more that could go wrong than right—and having expert advice when you need it can help ensure that your entire family isn’t dragged through legal hell in court.
When choosing an attorney, consider what’s most important to you. Is it the location, cost, or area of expertise? Typically, if you’re running a small business, there’s no need for an expensive lawyer with offices all over town. However, that doesn’t mean they won’t give you solid advice.
5. Use Systems Wisely
Effective business systems are crucial to running your business smoothly and allowing you to spend more time building your brand or managing customers. But choosing and implementing systems that don’t make sense for your company can hurt your bottom line.
To ensure that you’re using your systems wisely, consider these three steps: choosing what is suitable for you, determining how much time and money you have to devote, and being patient as it takes time for things to become routine.
Remember that it may take several months before you see the actual benefits of new business systems. However, implementing business processes with clear directions can help simplify and streamline all aspects of your business operations, ultimately saving you time and money.
Many people have dreams of managing their own business. However, once these people start running their business, they realize that it is more complex than imagined. The key to running any successful business is making good decisions and taking steps that ensure longevity.