Family Affair: The Pros and Cons of Having Family Members for Business Partners

Business.com / Starting a Business / Last Modified: February 22, 2017

Starting a company with your sister may sound like a great idea, but one should weigh the pros and cons of a family business venture.

Starting a company with your sister may sound like a great amount of fun, but one should weigh the benefits and disadvantages of a family business venture before jumping in.

Likewise, those who are considering working for a family-run company should know their experience may differ greatly from one at a non-family business.

Fifty percent of all American businesses are owned and run by families.

Here’s how to find out if a similar path is right for you.

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The Pros

It Adds to Your Brand

People love supporting family businesses, especially if a company’s service has remained consistent over the generations.

Customers and clients are more easily able to put themselves in the shoes of a family-oriented business owner and understand their efforts and struggles than they are with lone-wolf entrepreneurs or those who partner with others solely for capital.

If you and your business partners have grown up with the same core values, it’s highly likely that those values will shine through to potential buyers.

Those who join a family-run company are capable of learning the business’s brand quickly upon hire; the values that support the brand are visible in all aspects of the company instead of just one.

This can result in a lesser turnover rate and a slew of positive relationships with employees.

You’re Getting More Than Just a Business Partner

This may be a major reason why many entrepreneurs consider joining forces with family in the first place.

When you start a company with a family member, you’re also working with a friend, someone you truly enjoy spending your time with.

You’re also working with someone you may view as a mentor, especially if they’re more experienced in the world of entrepreneurship than you are.

A family member is someone you can go to when the emotional side of business gets a little rough, which may not be the case with other partners.

Because your bond with a family member is so strong, the odds of having a company (or a good chunk of it) passed on to you from a parent or older sibling are particularly high.

In turn, you can look forward to passing the business on to your own children, nieces, nephews, or younger cousins, if that’s the route you decide to take.

The Environment Is Flexible

Business at a family-run company is usually more flexible for members of the family.

Because those closest to you are most likely to understand your schedule, your needs, and your personal tendencies, they’re also most likely to work around them.

This often means getting the day off when you need it or working on tasks that best suit your skills.

Beware, however, of the way non-family employees are treated in comparison to relatives. Employees may become bitter if they find out your brother is allowed to come in late just because he’s your brother.

Strive to treat all business partners and employees equally, and only make exceptions when circumstances render them necessary.

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It Builds a Stronger Work Ethic

Those you work with in this scenario are more willing to make sacrifices for the company, since they know family members’ livelihoods are at stake.

It’s easier to convince a family member (or for them to convince you) to contribute financially or take on heavy projects when everyone knows exactly how much it will benefit the business.

When a family business partner slacks off, it doesn’t only harm the company, it hurts the feelings of those closest to them.

It may, however, be difficult to convince non-family partners and employees of a company’s vitality when they aren’t part of such a tight-knit circle.

This is why it is important to treat family and non-family workers as equally as possible.

The Cons

A Lack of Fresh Perspective

A group that focuses wholly on tradition may miss or ignore contemporary ideas. It’s great when all business partners agree on something, but without someone from a different walk of life, you can run out of creative solutions to a sticky problem.

If you all grew up under the same set of rules and the same lifestyle, you run the risk of shutting out potential for growth.

A Change in Bond

While working together may improve your familial bond, it can break it as well. Family business partners who experience conflicts in the workplace often lack the ability to leave that conflict where it came from, resulting in turmoil within the relationship as a whole.

Family members are also capable of mentioning mistakes or other negative instances from your past when they’re upset with you, further weakening your bond.

A constant airing of the familys dirty laundry can turn off employees (and even buyers, if it’s obvious enough), resulting in a negative company culture, higher turnover rates, and fewer sales.

Dishonest Feedback

It’s understandable that a family member shouldn’t want to hurt your feelings.  But in the entrepreneurial world, a lack of negative feedback can mean a business built on low standards.

Family members may go soft on their business partners because they care more than non-family partners about emotional stability; instead of gently criticizing your ability to fulfill your current role, they promote you to a different one.

They might also support ideas they don’t actually like to avoid upsetting someone, resulting in low-quality products and service.

Again, this type of problem can upset non-family employees when they see a family worker being praised for a poor job.

An employee in this scenario may become tempted to move on to another company where their ideas and their work will be treated fairly.

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Difficulty Escaping Work

Even when you see your family business partners outside of work, you’ll likely be tempted to “talk shop.”

Starting a business is difficult and demanding, and when an opportunity comes to work through the knots, you and your partners will take it.

Eventually this can make you feel like it’s impossible to escape the work environment, causing stress even when you’re trying to relax. 

Many companies have succeeded because of their status as family-run businesses; many have failed for the same reason.

There’s no straight answer to whether or not family members should also be business partners, but it’s best to consider the pros and cons before making any big business decision.

Have you built businesses from the ground up with family members? What was your experience like?

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