The Pros and Cons to Running a Business with Your Family


So, you’ve decided to start a business with your family. This can be a good thing. Some of the most lauded and successful companies in the world have started as enterprises between family members. Whether it’s the plumbing company down the streets whose trucks forever say “…and sons,” to juggernauts like Warner Bros., family-run businesses have long been one of the backbones of America.

And yet sometimes, they have also been flaming dumpster fires that break off entire bloodlines from the rest of the family. That happens, too.

On the one hand, these are the people you know better than anyone else in the world besides yourself. You might share a house, you certainly have regular meals and holidays together, and you probably have shared some of your most important memories together under one roof. But is investing your time and money in running a business with family members a good idea?

It depends. Commonly, business experts warn first-time entrepreneurs not to start a business with friends or family members. But for every entrepreneur who took that advice and still found success, there’s a long list of successful family-owned and controlled businesses, from Volkswagen to Wal-Mart. Based on those examples, there’s certainly a case to be made that starting a business with family members can be positive enterprise.

But the downside of working elbow-to-elbow with family can be a real bummer too. High-profile failures, aggressive acquisitions, buyouts, bitter feuds and permanently broken relationships have all resulted from conflicts in family-oriented businesses.

Deciding whether to start a business with family members or even friends is a complex decision that is never clear-cut, because it largely depends on your own motivations for starting a business, the personalities of the family members involved, your business acumen and management style, and even the state of the market.

Let’s take a closer look at the pros and cons of running a business with your family.

The Pros of Starting a Business with Family

A-greater-incentive-to-work-hard1.  A greater incentive to work hard. One of the potential benefits of running a family business is that your family members may work harder than a typical employee, and may even work harder than they did at other jobs. Because they have a vested interest in the success of the business and want to be seen as equal contributors to the enterprise, their extra effort could help ensure the success of the business.

A-certain-comfort-in-working-together2. A certain comfort in working together. Starting a new job is often uncomfortable and even depressing as you learn to maneuver around others’ work styles and figure out the best ways to work together. With family, there’s a kind of existing shorthand where each family member knows the other’s ticks, traits, strengths, and styles. It can give you a leg up in getting started, and may help you not get caught up in otherwise unknown character flaws.

A-shorter-learning-curve3. A shorter learning curve. If you’ve been running an enterprise for some time, surely your family members have some base knowledge about just what it is you are selling, managing or producing. They may even be wired with the same genetic interest in your business, and having them join the business may in fact play to their strengths. Because you don’t need to spend as much time getting them up to speed, this could save you time and money in attracting talent.

Getting-in-a-better-mood4. Getting in a better mood. Starting a business is a wildly stressful exercise, which is why experts suggest that only entrepreneurs with extremely high confidence start a new business in the first place. With family members around, the mood in the workplace could be more relaxed because of the comfort level between family members. They’re also likely to be more empathetic as well as supportive of your shared business.

Easier-decision-making5. Easier decision making. In a family-run business, there are less likely to be political minefields and office politics to maneuver around. Because you share values and history, this could make it easier to make tough daily decisions about the direction and orientation of the business.

6. Family members become stakeholders. Family members who are key partners in the success of the business are more invested than traditional employees or even Family-members-become-stakeholderstraditional partners because a bond exists between the two of you that is about more than just business. This enterprise unites you in a common goal and a willingness to sacrifice for the sake of your common success.

7. Expands your network. When you partner up with a family member on a business enterprise, you get more than just their experience and help. Their presence allows you Expands-your-networkto expand your network in the community to include their friends and colleagues, all of whom could become customers or clients because of their relationship to your family member.

The Cons of Starting a Business with Family

Family-can-be-distracting1. Family can be distracting. Let’s face it:  family disagreements can distract your focus away from running the business. Old feuds, long-simmering resentments, and unresolved conflicts can all make it harder for you to focus on your customers, improving your product and services, and growing the business in general.

Conflicts-from-work-can-follow-you-home2. Conflicts from work can follow you home. Conflicts that originate in the workplace can easily carry over to your personal life, causing serious strife between family members that may take years to resolve. Some conflicts progress enough to harm the business, cause it to break up, or even initiate litigation between family members.

They-may-break-the-rules3. They may break the rules. One of the risks of hiring or partnering with a family member is that they may break the rules—where a traditional employee or a formal partner will not. Whether they’re doing it subconsciously or simply taking advantage of the fact that they are family, it’s a dangerous practice to tolerate in the delicate early days of a new enterprise.

They-can-inspire-hard-feelings-among-others4. They can inspire hard feelings among others. If your family member is not your only partner or employee, things can quickly escalate to the point where others resent your family member for taking advantage of their relationship to you. It’s important not to give the impression that your family member takes priority over other employees or partners simply because they are related to you.

Inspiration-may-go-wanting5. Inspiration may go wanting. Running a business was never supposed to be comfortable. If things become too comfortable and secure, it can stifle the desire to produce excellence, boost professionalism, and embrace fresh ideas.

6. They lack the skills to meet your needs. You could feel pressured to hire a family member instead of a traditional employee—even if they lack the right skill set to properly They-lack-the-skills-to-meet-your-needsservice the business. In direct contrast to the benefits of saving money by hiring a family member, an employee that doesn’t have the chops to do the job will actually cost the business in terms of both time and money.

7. Negative feedback can blow up in your face. If you must offer criticism or even simply correct a family member’s behavior, it can cause a huge conflict in the workplace. Negative-feedback-can-blow-up-in-your-faceBecause you’re not just a co-worker but also a relative, feedback can be taken extremely personally. This can cause waves of negativity that can set the business back or even cause its collapse.

The Bottom Line

It’s obvious that family-owned and managed businesses are a delicate balance between risks and rewards. If you’re planning to start a business with family members, be they a spouse, parents, siblings or children, think it through before you leap. You can’t just assume that a family-owned enterprise is a sure thing, but every family is different, so the chances of success are still there. Just like any family, there are problems that you may or may not be able to overcome. To be safe, scout out the terrain both emotional and physical, so you have a better understanding of what you can expect.

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