When starting a business, it may be helpful to have a partner. It’s important that the partner or partners you choose share the same values and goals, so you can move forward together. But what happens when the ideal partner for your business is also a family member? Should you go into business with family?
The answer is: maybe, and there are some risks to doing so. Combining your personal and professional lives can be risky if both parties aren’t on the same page. And while starting a joint venture with a family member may seem like a great idea at first (after all, you know each other, right?), it can make starting a business even more challenging. Just like any other type of partnership, a joint venture with family members can be beneficial to both parties. However, it doesn’t work for everyone and is something you should approach with full knowledge of the pros and cons. To help you decide whether this move is right for you, here are some things to consider before starting a joint venture with family members.
Is the family member a talker or a doer?
First, is the family member serious about starting their own company? Many times, people talk big ideas but never follow through — especially when they realize how much work goes into starting and running a company. Talk is cheap, and it won’t build a business. If they have an entrepreneurial spirit, then that’s great! You have an existing connection with them and can use each other as support during those first few months when everything feels new and scary. However, be beware if they are more of a talker than a doer.
Does your family member have the same vision as you?
Are you and your family members on the same page about what you want the business to look like in five years, ten years, and beyond? If not, you’ll need to resolve this issue before moving forward. Differing visions and values for the company can cause problems down the line, as you’ll be working toward different goals.
If both parties can agree, working together could be a great option. Otherwise, it might be best to pursue alternate plans. A joint venture partnership requires mutual respect for each other’s priorities, visions, and beliefs about what success looks like. You must both be clear on how to achieve those goals together over time.
Can you set clear boundaries between your personal and professional lives?
No matter how well you know each other, a joint venture will have some hiccups. Can you set clear boundaries between your personal and professional lives? Will there be times when one partner’s priorities are different? For example, what if one partner wants to work harder than the other? How will you handle these situations in a way that doesn’t cause problems for either party involved in this project?
To be successful in a joint venture, all parties must work harmoniously and understand each other’s goals. By setting clear boundaries between personal and professional lives, you can avoid potential conflict and ensure that both partners are satisfied with the project’s outcome.
Who will assume a leadership role? Will you have equal authority, or will one person be in charge? It’s important to decide this early on so that no one feels they are being taken advantage of. Make sure all roles and duties are clearly defined.
Talk about financials.
Be sure to discuss financial details. How much money is each person willing to invest? Will you make one large investment at the outset, or will each partner contribute based on a percentage of sales? What happens if one partner wants out? Will there be a buy-out agreement or another way for them to recoup their money and time invested in the project? Not answering these questions ahead of time can put the business in danger, create ill-feeling, and even cause disruptions within the family. It’s important to get everything down on paper and have a professional accountant and lawyer look at the figures.
Can you let go of any past issues or problems within the family?
Before you jump into a joint venture with your family, ask yourself if there are unresolved issues or problems within the family. If so, these issues need to be resolved before starting a business together. Even if you can resolve all of them, the simple fact that they exist will affect your relationship and how well things go in your joint venture.
If there are ongoing arguments or disagreements between members of your family, it might be difficult to reconcile those differences while working together on a project. And even if there aren’t problems between parties in this venture right now, what happens when new ones arise? Will everyone still be willing and able to work together then? These are serious questions to ask before establishing a partnership with a family member.
Do you value each other’s talents and skills?
Before you sign on the dotted line, make sure you value each other’s talents and skills. If one of you is great at making spreadsheets and another is an expert at marketing, make sure everyone knows what they’re good at and how to do their part. If there are doubts about who should handle a task, that’s an issue that needs to be resolved before starting a business together.
You also need to respect each other’s opinions and trust them when it comes time for decisions about the business. If your family member has tons of experience in sales but doesn’t understand technology or marketing, let them run with their strengths and find someone else to do the other jobs.
Have you worked together on another project?
Before making decisions, reflect on your previous experiences. If you have worked together before and had a bad experience, think about why it was bad. Did one person try to do everything themselves? Did someone else not contribute equally? Was there constant bickering and arguing over who was in charge? There’s a chance that those same issues will show up again unless you’ve taken steps to discuss and resolve them. If you’ve had multiple bad experiences working with a family member, think twice about starting a business with them.
Before jumping into a joint venture, it’s important to understand that the risks are higher than if you were starting your business alone. You will be putting your money and family at risk.
Conclusion
It’s not uncommon for families to go into business together. But, if you’re considering a joint venture with a family member, understand the pros and cons of this approach before jumping in headfirst. Set clear boundaries between your personal and professional lives and ensure everyone is aware of the risks involved in the venture. Also, plan out all the details before making a commitment.
