Starting a family business is a great way to work with your loved ones while building something that could support you all for years to come.
A working family business helps bring everyone’s skills together in a productive and importantly, profitable way.
I mean, how many people can say they get to spend the bulk of their day with the people they love most? But, as with all things, there are pros and cons.
What Counts As a Family Run Business?
But what counts as a family-run business? That’s the first question many people ask when they think about starting one.
The answer is simple: any business in which the owners are related by blood or marriage, and it’s operated by members of the same family.
This can be a small operation with just you and your spouse at the helm, or it could include dozens of employees and involve multiple generations working together to make sure things run smoothly.
Family companies aren’t limited to farming or manufacturing either—a service industry like dentistry is also fair game! Many families start with a small venture before moving on to provide services for others once their children come along (and most likely take over from them).
Before starting up a family company it’s essential to establish clear and concise roles, responsibilities, money, tasks, and timings. This helps avoid future conflicts and disputes between those that mean the most to you.
Benefits of running a family business:
- Commitment and reliability
- Long-term goals and outlook
- Shared values
Family Business Ideas
Any business can be a family business, but here are some ideas to get you started:
- Food & Drink
- Guesthouse or B&B
- Online & Ecommerce
- Home & Garden
- Arts & Crafts
- Business Services
- Property Development
- Cleaning and Home Care
- Gardening Services
- Wedding or Event Planner
5 Reasons A Family-Owned Business Might Be Good For you
What makes a family-owned business different? A family business has a purpose that transcends the usual constructs of typical business structures. The desire to maintain generational wealth and impact makes long-term goals and visions clear to communicate and achieve.
As a business owner of a family business, you may consider yourself a custodian of the business for future generations. The ability to create a strong and beneficial entity within the business boosts the empathy and determination amongst employees.
Here are why family businesses are important:
Family Businesses Can Bring Stability
If you’re looking for stability, family businesses are more likely to offer a sense of security.
According to recent studies, family businesses tend to be less vulnerable during economic downturns than other types of companies. In fact, they’re also more likely to survive over time and pass down from generation to generation.
Family-run businesses can also generate higher profits than any other type of firm. If you want your business’s bottom line to grow year after year without worrying about whether it’ll survive another recession or not, then starting a family company might just be right for you!
Families Often Share Commitment Levels
Families often share commitment levels, which can allow you to trust the right person is handling the job.
This means you can focus your skills and expertise on tasks within your family business trusting that operational duties are successfully being carried out.
Family business employees are more likely to work longer hours and show dedication as business goals are a concern for the entire workplace.
Family Can Support A Healthier Work-Life Balance
A family business works to preserve, motivate, and de-stress your work-life balance as you can take time away from the business and know it’s in good hands.
Achieving a work-life balance is an important part of a healthy life and helps bring tangible benefits to your business.
A huge factor of a family business is trust, trusting someone will get the job done when you’re not around.
Family Often Take A Long-Term View
You should consider a small family business because your family is likely to take a long-term view of your business.
That means that you can count on them to be committed to the long-term success of your company and its longevity, for the next generation.
Family businesses are also more likely to have strong ethics—which means that they will care about how their employees are treated, what kind of products they produce, and the working environment of the business.
Hiring Relatives Can Save You Money
Hiring relatives can save you money in several ways:
- Lower wages – If your business is small and doesn’t have much of a budget for salaries, then one reason to hire your family would be to save money on wages. You probably won’t have as many employees in total, so the number of wages has less impact on your expenses overall.
For example, if you have two family members working for you at £20 per hour and each works 40 hours per week (80 hours total), that comes out to £1,600 per month—or an annual salary of £19,440 before taxes are taken out.
- Lower training costs – Another way that hiring family members can save you money is by reducing training costs because they already know how things work in the office/factory/storeroom etc., which means there won’t be as much time spent teaching them new tasks or explaining things they don’t understand right away!
This is a cost-effective strategy to lower the time spent on instructing and training an individual who is not familiar with your small business operations.
5 Reasons a Family-Owned Business Might Be A Bad Move
Although family businesses provide many benefits to your small business, it’s important to carefully assess the drawbacks that may result in hiring your family. Not only might you favour family members that don’t really have the right skills or experience for the job but you can create a negative effect on the success of your small business.
All Families Argue
All families argue. It’s just a fact of life. You might think that starting a family business would prevent you from having to deal with those kinds of disputes, but the truth is that even families who aren’t in business together are still prone to arguments and disagreements.
Whether it’s unresolved issues or interactions with other people outside of the family unit, this can cause tension or conflict. These issues can also become magnified when there are more people present at any given time. Increasing the likelihood that someone will say something inflammatory or hurtful out loud.
Family Businesses Can Lack Structure
A family business is often a very informal one. This lack of structure can cause problems when it comes time for meetings or hiring new employees. This problem is compounded by the fact that most family businesses aren’t organised in the same way as other businesses would be organised.
There’s no HR department, payroll, and managing payroll taxes are carried out by family members. And while some families take great pride in their ability to work together toward common goals, others may be more interested in turning every decision into an argument over who should handle what task first or if there even should be any tasks assigned at all.
Families Can Have Unrealistic Expectations
Family expectations can be a source of tension, stress, disappointment, and frustration. It is not uncommon for families to have different expectations about what the family business should be doing or how much time it should spend on various activities.
These different views can then lead to conflict within the family that can negatively affect the running of the business.
Family Relationships Can Hide Poor Performance
If one of your family members has been underperforming for a while and it’s not getting better, you might be hesitant to let them go because of the potential stress on the rest of your relationships.
This can lead to you putting off making a decision that needs to be made. The longer this goes on, the more stressful it becomes for everyone involved which can drastically impact your small business.
Family Businesses Have to Plan for Owners To Retire
As your business grows and becomes successful, you’ll want to think about the future. While it may be tempting to keep raking in the cash and not give much thought to planning or taking on new challenges, this can lead to trouble down the road.
You need to plan for when your family members are no longer running your business so that they’re set up financially and emotionally.
If you don’t make retirement plans, there will likely be some conflict among family members when someone decides it’s time to move on from their leadership roles within the company.
How To Plan A Family Business
Unsure how to plan a family business? Here are our top tips to successfully plan for your new family-oriented venture:
- Start discussions with your family
- Consider a shareholders’ agreement
- Plan around any likely conflict
- Establish a long-term vision for at least 3 generations
- Choose the right business structure
- Set out your core values
- Choose a successor
What Structure is Best For A Family Fun-Business?
You may want either a family-owned business or a family-run one.
A family-owned business is owned and run by one person, who may be the founder of the company or just an owner with many other responsibilities. In this case, all decisions are made by that person alone.
A family-run business has multiple owners, who may have varying levels of authority and decision-making power over day-to-day operations. This means that some members of your family will make decisions together while others have less involvement in those decisions.
The most common structure for running a small business is as follows:
- Single owner – One person owns the company and makes all final decisions.
- Partnership – A company owned by two or more individuals, created to retain a family’s business interests.
- Distributed – Shares resources around family members whether they work together or not.
- Nested – Share tasks and resources around different branches of the family. Some might be in the core business, others less directly involved.
Tips For Achieving A Conflict-Free Family Work Environment
Be aware of potential conflicts.
Most family businesses are run by a single-family unit, usually the patriarch or matriarch of the family. This means that there’s only one person who must make decisions about hiring and firing and how profits are distributed.
It’s important that everyone within your family knows their role in the company so that they can communicate effectively with each other when problems arise.
Remember these tips when starting your family business:
- Regular Family Meetings
- Work-life Balance
- Professional Help & Mediation
How to Get Help Starting Your Family Business
If you’re considering starting a family business, it pays to talk to people who have done just that. There are plenty of resources out there for aspiring owners. Ask friends and relatives about their experiences in the family business or reach out to community groups for advice from other small-business owners. When researching these options, keep in mind that those who have built successful business journeys may be different to yours.
You might also consider reaching out directly to organisations that support small-business owners.
Your local community may have organisations devoted exclusively to local entrepreneurs. Several resources can help guide you through the process of starting up (and maintaining) your own enterprise, including information on loans and grants available specifically for new businesses.
You can also capitalise on free seminars and workshops on topics like accounting or marketing strategies which could prove useful during this stage of growth.
Set up your family business with the help of GOV.UK legal advice.
Here are our top tips to get you started:
- Conduct market research
- Write your business plan
- Source funding
- Establish your target audience
- Choose your business name
- Register your business
Starting a family business can be done with the right help and guidance from My New Venture. There are plenty of benefits and the negatives can be overcome with some self-awareness and a good attitude.