It’s hard enough setting up a business, especially in this part of the world. When family is involved in said business, it gets a whole lot harder because of the personal angle involved.
4 things to know before starting a family business
Several studies have shown that 70% of family businesses fail form one generation to another
Starting a family business is one of the most risky endeavors anyone could take on because personal feelings and emotions can easily become a strong obstacle to making good, savvy business decisions.
Research shows that there’s the huge risk that a family business won’t survive for very long. But all hope is not lost. Here are four important you should have in mind when starting up a family business:
1. Undeniable benefits: This is the main reason why people go into the family business. They get to work for themselves, dictate their own hours, create a fun working environment and possibly leave a legacy for their future generations. Working together generally helps a family to be closer and grow better.
2. Businesses fail for the same two reasons: Several studies have shown that 70% of family businesses fail form one generation to another, in fact by the third generation, the business is usually as good as bust.
And it’s all cause by the same two issues – Taxes and structural conflicts. Most times when an owner dies, his/her estate is usually unable to pay the taxes owed to the government for transfer of property upfront. So when government comes for its money, they go bankrupt.
Conflicts also take a huge toll on businesses because of all he bickering and underhanded techniques which family members may employ in the fight for a piece of the family cake. That’s why it’s important to have a documented legal plan for who has what position and who gets paid what.
3. Make a plan before you need it: A disability, divorce or sudden death could throw your business into disarray. That’s why it’s important to have a contingency plan should any unforeseen circumstances arise. Otherwise, when these situations do arise, you could be faced with making spur of the moment, emotional decisions that could spell doom for your business. Note that the key to all of this is making the plan in advance.
4. Not sure? Talk to an expert: No matter how bulletproof your business plan is, it never hurts to ask an objective non-family member for advice on issues. As soon as you decide to start a family business, talk to a group of experts – lawyers, financial advisors, and so on, to avoid conflicts down the line and expand your business down the line.
Ideally, a great plan and a great family should equal a great family business, unfortunately this is not always the case. It takes careful planning, an understanding of the risks involved, and most times, outside help, to create a successful family business. Good luck!
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