Why Do People Caution Against Doing Business With Family?
Many people wonder why business people caution against doing business with family members.
Doing business with family can be quite successful if you know how to do it the right way. At the same time it can help you build your business while strengthening the bond between you and your family members at the same time.
Though it may seem like an unnecessary thing to do, there are plenty of reasons why you might want to be careful about getting into business with someone who shares your bloodline.
Below are some important things to consider when you're thinking about bringing your family into the mix of your new business venture.
If you're dealing with family, chances are there aren't any formal agreements in place. That can lead to a lack of accountability and makes it harder to resolve conflicts or handle disagreements as they arise.
As a result, good family relationships could be damaged—or even permanently broken—by one bad business deal. Moreover, you probably won't have many legal avenues available in many cases if things do go south.
To make sure things don't escalate, it's important to set boundaries before going into business with family. Just like in any other relationship, that means being honest about your expectations, communication, and trust levels from the start. You should also agree on a process for resolving disputes as they arise and designate one person to be a point person for any necessary communication between parties.
Boundaries are especially important when dealing with close family members, such as your spouse or children. You don't want to feel like you have to choose between them or burn bridges just because things went sour in business.
Tension Between Company and Personal Life
When family members become business partners, it is often too easy to let work bleed into time at home. This is particularly problematic if you're dealing with a blended family that includes kids from other marriages.
Work-life balance is a difficult enough task for those in traditional employment situations—imagine how hard it can be for families who spend more than eight hours per day together.
Problems such as those are worth preparing for when planning your business so that you and your partner both know what to expect before jumping into an entrepreneurial venture.
Before teaming up, talk about whether or not one person will be in charge or if there will be any differences in compensation; these conversations make an enormous difference in preventing problems later on down the road.
Lack of Control
It's hard to control a family member, and if they start acting out, you can't easily fire them. If a family member is only acting in their own best interest and not in yours, it can be very discouraging.
You're going to want to think long and hard about whether or not you are setting yourself up for disappointment. If family members see themselves as stakeholders, they might be more interested in working together, making it much easier to deal with any problems that arise during your business dealings with one another.
A family member might not respect your business and may take advantage. They might not have any understanding of what you've gone through to start or maintain a successful business and may think it's an endless cash cow that should be there for their benefit.
This can make it very difficult to maintain peace within your home and work environment.
You're also going to want to consider how they'll feel if they don't get what they want out of a situation or when you ultimately choose not to involve them in your business or close up shop entirely; how will that affect your relationship with them.
While some relatives may understand why you've chosen not to involve them and will respect your decision, others may see it as abandonment, which could lead to strain on other areas of your relationship.
Legal Liabilities Are Greater
One of the major reasons people caution against doing business with family is that legal liabilities are greater. When dealing with business partners outside your inner circle, you can more easily go to court and initiate a lawsuit if something goes wrong.
While it may be unpleasant to take things to that level, it can feel even worse if you've lost out on profits—especially if those profits have vanished thanks to an unjust or unscrupulous family member.
From employee theft to personal injury claims, there are numerous ways things can go wrong when doing business with family members. Adding an extra layer of trust won't do much good when you're in court trying to prove them as liable for mistakes they made during their working hours.
If you're still keen on doing business with your family, at least be aware of these risks and take steps to minimize them. Drafting a formal contract that lays out all terms is always a good idea; have it checked by an experienced lawyer for errors and ensure everyone involved has read and signed it.
Finally, make sure you have liability insurance to cover you if something goes wrong during the operation. The costs will be worth it if it means avoiding legal battles later on down the line.
There Is No Separation Between Business And Personal Matters
In most business situations, there's an emotional disconnect between parties; if you're arguing about money or a conflict of interest arises, you can walk away. That emotional detachment isn't present in a family business.
Families tend to get on each other's nerves and have differing priorities—much like when they are not running a business together. In many cases, one spouse may be using their time with kids as an opportunity to check emails while another doesn't have that same luxury and is frustrated at work being put on hold because of a child who is sick.
This leads to trouble balancing home and professional lives and can cause resentment to build up over time. Familial relationships are already complex; adding business dealings into that mix makes things more difficult.
If this issue plagues your family business, consider looking for a third-party mediator to help you sort through your problems before they get out of hand. Don't worry about hurting feelings; if a family member is open to working with a mediator, then it's clear they have put in the effort themselves to deal with tensions on their own without success.