the basic concepts of

small-family business
How to Start a
small-Family
Business
 Step 1: Define Your Business Idea
All of you should be passionate about the business idea. It’s no good creating a company
simply to earn a living — you might as well work a regular 9-to-5 job if that’s what you want.
Come up with an idea that combines everyone’s interests and life goals.

Step 2: Determine the Role of Each Family Member

Every member of the business needs to have a defined role with set duties and
responsibilities. Choose the roles according to skills and background as well as weaknesses.
It’s useful to have a hierarchy of positions to ensure each person knows who to report to —
this can minimize conflict.
 Step 3: Set Out Guidelines for Running the Business
It can be difficult to make the transition from family members to business partners. Laying out
clear guidelines will help tremendously.
For one thing, you need to make sure that everyone separates business matters from family issues. For example, a
younger family member may turn out to have excellent leadership skills and be a great choice for a manager. Keeping
personal relationships out of business will avoid resentment.

Also make sure to dedicate time to spend as a family — and avoid talking about business at these times. After all, you
want those who decided not to join the business to still feel as much a part of the family as ever.

Step 4: Talk About Risk

Starting a business is always risky. There’s a chance that your venture will fail and you’ll lose your investment.
Discuss this with all the family members who want to invest in the business and make sure they are willing to take the
risk.

Step 5: Decide on Workloads

At the beginning, working a family business will be far harder than being an employee at an established company. You’ll
need to work long hours, put the business before many other commitments, and spend less time with partners or children
who are not part of the business. You’ll do all this while earning less than you’re likely used to. Family members need to
be aware of this and be willing to make the necessary sacrifices.
 Step 6: Discuss Compensation and Ownership
You’ll need to agree from the start how much you’ll compensate each employee. You may pay a salary, use
hourly wages, or give family members a certain share of the profits. You could even use a combination of
these. Whatever you do, you’ll need to confirm your choice is in accordance with state wage laws.

In addition to payment, you must agree how much of the business each family member owns (if any). This
will include the percentage they receive if you sell the business. It will also determine voting rights when
deciding what direction your company will take in the future.

Step 7: Create Opportunities for Growth

Just like when working for any other company, team members will want to have the chance to grow
in their careers. Talk to each individual in turn to find out about their goals and how your business
can provide the right opportunities.

Step 8: Specify Exit and Succession Plans

It is equally possible that a family may decide to leave the business to pursue something else. You need to specify
what will happen in this eventuality and what compensation the person will receive, particularly if the employee
has a stake in the company.

In addition, the founders of the business are going to retire at some point. From the start, lay out the terms for
handing over the business to someone else.
 Step 9: Manage the Legal Side
Once you have all the above details ironed out, it’s important to structure your business appropriately.
Contract a lawyer to draw up the necessary documents and ask a business consultant for advice on
aspects like the business plan, employee benefits, retirement plans, and taxes.

Step 10: Hire from Outside the Family

There’s a good chance that you won’t be able to find all the skills you need in your family members alone. Fill this
knowledge gap with outside hires. It’s critical that you treat these employees the same as your family members —
with the same opportunities to move up and involving them to the same degree when celebrating milestones.

Family businesses can be hugely successful. Everyone at your company will be striving to do their best for the
good of the family. They may even want to leave a legacy or have a company they can pass on future generations.
However, you will need to carefully navigate tough business decisions to avoid creating a rift in your family. To
see success, you’ll need to be well-versed in how to start a small family business, have a solid business plan, and
be willing to take whatever steps are necessary to allow your company to grow.

In fact, knowing how to start a family business is just the start: you’ll also need to be prepared to take on any
challenges unique to family businesses.
advantages
 Advantages of Family Businesses
There are plenty of advantages of family businesses — these are the reasons why such ventures are so appealing.

1. You Already Know Your Workers

Onboarding a new hire always takes time because you need to learn about the employee’s working style and personality. It’s much easier
when you hire family members, as you already know them and how they communicate. You’ll even be aware of potential problem behaviors
and can take steps to mitigate issues.

Plus, when you hire family members, you eliminate the interview process. This is always a time-consuming part of starting a business,
especially when you need to run background checks and confirm the validity of certifications.

2. Comfortable Atmosphere
Already knowing everyone also creates a great work atmosphere. For instance, you’re able to have proper conversations rather
than just small talk.

3. An Advantage Over Other Businesses

With a family business, you’ll have a tightly-knit team of workers, all of whom will be committed to the success of the company
— much more than if they worked for just any employer.

4. Greater Flexibility
Family members are also more likely to be understanding when someone has another obligation and needs to take time off or
change work hours. Provided that everyone is committed to the success of the business, it’s easy to be flexible.

5. Customers Prefer Family Businesses

Customers like knowing that there’s a family behind the scenes. The brand image is one of trust, hard work, and togetherness.
This is especially true when you also treat your customers as family.
DISADVANT
AGES
 Disadvantages of Family Businesses
Of course, there are also many disadvantages of family businesses. It’s crucial that you assess these
disadvantages before you decide a family business is the right choice for you.

1. Family Relationships Will Change

You cannot run a family business and expect relationships to stay the same. The challenge is to make sure
changes are positive, as it’s easy to create lasting conflicts. One difficulty in particular is the fact that one
of you needs to be in charge. It’s important to remember that the role of manager does not pass over into
family life.

2. Your Kids Should Still Work Elsewhere

Whereas it may be tempting to provide your kids with a job at your business straight out of high school or
college, this is not recommendable. It will be far more valuable for them to spend time working at other
companies first to expand their world experience and learn about how other businesses function. The
disadvantage is that your kids may decide to work somewhere else permanently rather than joining your
company.

3. Promotions Need to Be Based on Merit

Family members may expect to receive a promotion because of who they are in the family rather than due
to their role in the business. If your business is to succeed, you need to base promotions on merit. This will
also give equal opportunity to employees outside of the family.
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