*** This is a collaborative post ***
There are many reasons for wanting to start a small family company – aside from the smart dad or smart mum feeling it brings. Raising a family comes with extra work and sometimes requires an extra source of income to help make ends meet.
Starting a business is a super way of pursuing your passion and sharing your talent, products or services with the rest of the world. A family business is also one of the best ways to give your children a solid footing in the business world. And when done properly, it can be a lot of fun and bind the family together. Plus, you will be able to leave a legacy for your children.
However, starting a small family business is not always as straightforward as the thought comes. It requires a lot of planning, time, and patience. So, if you’re brooding over the possibility of starting a small family business, then here some tips you should know.
Create A Family Business Plan
The first thing you need to do is to develop a family business plan. Having a business plan will not only give your business a sense of vision, mission, and direction, but it will also make sure that each member of your family is fully covered. Here are some of the things that should be included in your family business plan.
- Roles and duties – This will set out and define the roles that each member of the family will play in the business. It will also draw out the chain of command and establish who will report to who.
- Salaries and compensation – It is very important for your business plan to be clear on how much salary is to be paid.
- Shares and ownership – The ownership stakes should be well defined and should leave no room for future misunderstanding. For example, are family members going to receive salaries, or are they part owners, or even both? What kind of voting rights do they have when it comes to decision making?
- Exit plan – What happens if a family member seeks to leave? How is such a person compensated?
- Succession plan – How will the business be passed on to the next generation? Who will take over? What are the requirements?
Set The Rules
After you’re done with your business plan, it is time to establish the rules that will be the foundation of the business. This will help to promote order and prevent future misunderstandings. It will also ensure fairness. Here are a few things to consider when setting the rules for your family business.
- Establish clear boundaries between work and family. It is best not to mix business matters with family matters.
- Establish rules that govern at what age children can assume certain responsibilities in the business, or after what achievement. For example, you set a minimum of a high school qualification for your kids if they want to have a long-term future with the business.
- Professional assistance: You should also set the rules on professional assistance, such as from lawyers or business consultants. What roles will they play specifically? And what kind of benefit will they receive from the company?
- Fairness: The rules must ensure that everybody is treated fairly. For example, family members should not be given unfair advantages over outside employees. It might not be the easiest thing to do, but it will help create a sense of loyalty from your employers and a desire to work with you.
Fund Your Family Business
If you already have enough money saved to start your business, that’s great. However, if you find yourself short on start-up capital, what are the options available to you?
- Asking friends and family: Asking friends and family to help support your business financially is a matter of choice and preference. However, if you choose to go to these sources for help, you need to have legal documents binding every level of the agreement. This will help protect you, your company, and the interests of the lenders in the future. Make sure you iron out issues such as payment structure, payment terms, payment method, etc.
- Professional lenders and financial institutions: These options may not come with the relative ‘comfort’ of asking a family member. However, they are still a very reliable source of financial aid to start-up businesses. There are several institutions to choose from with relative ease in granting loans and other financial aid. Financial institutions, such as Buddy Loans also offer very flexible payment options.
Take Out Insurance
This is absolutely important when running any business. Ensure that the future of your family business is protected by signing up for the right insurance covers. You can speak with an insurance agent to pick out the most important insurance options for you.
Be Aware Of The Risks
Every business venture is a risky one. There are no guarantees – either for success or for failure. Be sure that you are aware of all the risks before deciding to proceed. Also, make sure that you have a frank conversation with your family about all the risks involved and ensure that you have the full support of your family, especially your spouse, before embarking on such a journey.
A good attitude and positivity will go a long way in determining how easily you give up or persevere. As mentioned earlier, starting a family comes with so many risks. Plus, the journey is not always going to be smooth-sailing. No matter your level of preparedness, there are going to be challenges along the way that you will have to face. Try to maintain a positive attitude through it all. Also, ensure that your family shares in the same positivity.
Believe In The Dream
Every business starts with a dream and a vision. From the start, make sure that your family shares your dream and vision and supports it. Discuss the future of your family business in high spirits with our family. This will not only help to keep you encouraged, but it will also help ensure that everyone else is on the same page.