Family-owned businesses are the backbone of America. In fact, 60% of the U.S. workforce is employed by family-owned businesses (ranging from two people to thousands).1
Whether you grew up washing dishes at your family’s restaurant or recently decided to join your family’s accounting firm, going into business with family can be incredibly rewarding and incredibly difficult. So hang with us. We’ll show you how to navigate the potential pitfalls of running a family business.
What Is a Family-Owned Business?
A family-owned business is a business owned and operated by two or more family members. Many family businesses (about 1.2 million in the U.S.) are run by a husband and wife.2 Most family-owned businesses are small, but even some giant companies are family-owned. The Cathy family has owned and operated Chick-fil-A for 70 years.3
Family-owned businesses have been around for thousands of years. A farm is one of the earliest examples of a family-run business. Dad, mom and their half a dozen kids raised crops and tended the animals. If dad and mom wanted more farmhands, they had more kids!
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Starting a Family-Run Business
Depending on your circumstances, deciding to go into business with your family can be a tough decision. As a parent, you might dream of working with your kids and building a legacy for your grandkids. But if you’re the child or family member, it can be tricky to navigate—especially if you’re not interested in the family business. And depending on your personality, you might love that your career is already waiting for you . . . or you might dread it because you’ve been around the business your whole life.
A family business is only as functional as the family that runs it—and lots of families are dysfunctional these days. So how do you steer clear of crazy and build a strong business and family tree? Let’s look at some valuable tips from someone who’s learned on the front lines.
12 Tips for Going Into Business With Family—Successfully
Money expert Dave Ramsey, CEO of Ramsey Solutions, started his business on a card table in his living room—right after declaring bankruptcy. When he was scraping his way through those early days and late nights of getting the business running, he wasn’t thinking about succession plans—yet.
Related article: EntreLeadership: What Are the 5 Stages of Business?
But 30 years later, all three of his adult children work for his company! And when it comes to getting family involved, he’s learned a thing or two that could benefit you too if you’re part of a family business. So here are Dave’s 12 tips for going into business with family.
1. Communicate openly and often.
Open communication is key to a successful family business (not to mention many other areas of your life). But it’s not just one-way communication either. It has to be a two-way street.
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For example: If your daughter has been working for you her whole life assuming she’s going to take over the business one day, you need to have a heart-to-heart with her to make sure she knows your plans. You might want to pass it off to her, but you might want to sell. In either case, it’s better she knows now. To be unclear is to be unkind. The best thing you can do for your family and the business is to be open and honest, no matter how tough it might be.
Each person involved has to do their part, and that includes communicating their motives and hopes for the future of the business—including their future at the business.
Beyond that, you have to give family members space to speak honestly and openly about how the business is run. When Dave formed the Operating Board for Ramsey Solutions, he made sure his kids had seats in the room. At first, they were just there to listen and be aware and learn. Now they speak into the running of the business like any board member.
Related article: How to Communicate Effectively
2. Steer clear of partnerships.
You may think starting a lawn care business with your brother is the dream job you’ve always wanted. That’s great! But think about the business in the long term. What happens if you two get in a fight and things get messy? Or what if he wants to let his deadbeat nephew take over his part of the business when he retires?
There’s so much that can (and will) go wrong. Sure, it might be butterflies and blue skies now, but the best bet you have when it comes to doing business with family members is to either have them work for you or vice versa. Then you get to work together and share in the profits—the best of both worlds.
3. Set clear boundaries.
Setting clear boundaries between family life and your business is super important—especially if you want to run a successful business and still have a family to come home to. If you’re at work, keep your family issues at home. And if you’re at home, don’t talk about work. After you flip the sign in the window to “closed,” take off your boss or employee hat and just be family. You shouldn’t have the same conversations at the dinner table that you have at the board room table.
When you own your own business, it’s your baby. Its success is your success. But don’t fall into the trap of letting your business consume every waking hour of your (and your family’s) life.
4. Have a succession plan.
Have you thought about what will happen to the business when you’re gone or retire? Or who you want to take over the family business when the next generation is ready to hand over the reins? If not, you need to start thinking about a succession plan and who will continue your legacy into the next generation.
A good succession plan is gradual. If you want your kids to take over your company, train and mentor them and gradually give them more and more responsibility until they’re ready to lead. When it’s time for you to pass the leadership baton to your kids, the handoff will barely be noticeable. And like we said earlier, make sure your family members know your intentions.
5. Define roles and job descriptions.
Sometimes the lines between family and business get murky. So how do you navigate those dark waters? With clearly defined roles, written job descriptions (that means yours too), and specific expectations. Just as you would with any other role, you need to work out every possible detail of your family member’s role before you go into business together.
Sure, you won’t have it all figured out, but the beginning of a plan is better than no plan at all. If you have a clearly defined plan and know who’s going to do what, you’ll spend less time worried about who gets the corner office and more time serving your customers.
6. Get outside advice—often.
Successful businesses seek advice from outside advisors. Maybe you need help seeing your blind spots, setting goals, or working through tough relationship issues. No matter what the problem is, someone else has been through it before. Learn from their experience so you can grow and reach that next level of success.
7. Create a vision and culture.
Having a vision for your company and working toward goals will keep your business growing in the right direction. No one wants to set sail on a ship to nowhere. And this is true for all businesses—not just family ones. And when you cast this vision to your employees (family or not), you’ll have something you can all rally behind. Creating a vision that you and your company believe in will help define your company culture.
When you and your team are on a mission together, your team will feel like they are part of something bigger than themselves. Sit down with them often in staff meetings or outings and create a workplace you all will be proud of. Remind them why your company’s work matters. Take time to share stories about the impact you’re having. And make sure they understand that they all play a role in creating a workplace they can be proud of
Related article: How to Write a Company Mission Statement
8. Treat everyone fairly.
If you’ve hired both family and non-family team members to work at your company, treat everyone fairly. If your culture favors family, it will be impossible for your team to feel like a team. And that will keep you from making progress toward your big, hairy, audacious goals.
Related article: What Is a BHAG (Big, Hairy, Audacious Goal)?
Instead, create a company culture of respect and professionalism. Don’t treat team members like children (even if they are your kids). And your kids should respect your position as a leader. After all, most of us wouldn’t talk to our boss the same way we would talk to our mom or dad at home—and expect to stay employed. Keep things professional at work.
9. Put on the professional hat.
It will be easier to set boundaries and keep things professional at work if you think of your business role and your family role as hats you put on and take off. At work, you wear your “leader” hat or your “team member” hat. At work, Dave Ramsey’s kids call him “Dave.” It’s a signal their relationship is in business mode. (And think about it: Who will take you seriously if you’re calling the CEO “Dad” all the time?) Away from the office, they call him Dad—everyone gets to take off their professional hats and just be family.
10. Make sure family members earn their keep.
If you went out on a limb to hire your nephew, make sure he actually does the work—and does it to the best of his ability. Don’t let him coast on the fact that he’s your favorite nephew. Nope, he’s going to have to work hard to prove he’s the guy for the job.
The truth is, other team members will judge the work of family members more harshly. They’ll have to go the extra mile to prove they’re qualified for their job and don’t just have their position because of their last name.
Dave’s son, Daniel Ramsey, has worn all kinds of hats over the years. He spent one summer painting stairwells. And he had several sales roles in the company to build his experience before moving up to a leadership position.
11. Find the right place for family members.
Everyone has different skills and talents. Some people prefer leading people, while others prefer support roles in the background. Just as you would with any other team member, you need to find the right role for your family member that matches their skills and talents. Don’t assume that even though you’re a hard-charging CEO, your creative son will want to step in your shoes.
And sometimes, the right place for a family member is at another company. Don’t pressure your children—or any relative—to join the family business. Let them make their own decision. They need to feel called to work in the family business.
12. Remember your why.
To work with family and run a business, you have to remember why you’re doing it in the first place—especially when things get stressful, money gets tight, or relationships get tense. Why did you decide to go into business for yourself? Did you like the idea of being your own boss? Did you always want to be an entrepreneur? Is building a family legacy important to you? Know your why, and remind yourself of it during tough times.
And make sure your family members know your why. Help them find their place and decide if they actually like the business and can see themselves working there for the long haul. If they’re only in the family business because it was expected of them, that’s not going to get them very far.
Related article: 7 Tips for How to Run a Business Debt-Free
What’s Next: Get Customized Support
Working through the kinks of running a family business doesn’t have to be a guessing game. Through the EntreLeadership Elite program, Dave Ramsey and the EntreLeadership team have coached business leaders—including those running family-owned businesses—for decades to crush their goals.
EntreLeadership Elite members have access to video trainings, reporting tools and a full library of video courses on topics like role clarity, strategic planning and succession plans. You can also add Advisory Coaching and Executive Coaching to your Elite membership for more customized one-on-one support.