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20 reasons why you should never do business with family or leave them in charge of your business

Posted on 14th Aug 2017 11:02:00 in Money

Starting a business is easier when you start it as a partnership. The opportunity gives you access to better ideas, more capital, and even better opportunities for growth. But whatever you do, just make sure that the other partner isn’t a close friend or family member. And here’s why.

 

The two of you might not be compatible

So you may be best friends because the two of you absolutely love sitting on a couch and laughing on re-runs of Friends, or close enough to be sharing underwear. But that doesn’t mean that the best of friends and the closest of relatives would also make the best of business partners. You need to get one thing absolutely straight; there’s a big difference between personal compatibility and compatibility in a business context.

Different reasons, different goals

So why are you starting your own business? Pursuing a dream? And why is your partner starting the business with you? The answers to these questions can vary so drastically that they can create wide gaps between expectations, ambitions, and goals leading to even more conflict. If your business ideals and goals don’t match with those of your friend or family member, then the only thing the two of you will be closing other than business deals is the business itself.

Defining roles can be tricky

Do you plan friendships and relations? Well, technically no. friendships are organic, and family relations are unconditional, forced upon us as some may say. Business partnerships, on the other hand, are neither organic, not conditional. In fact, they are forged by choice and constructed to include individual responsibilities and roles. So who’s doing what? Things get even trickier when one has to take up the role of the leader, and there can only be one leader. So who’s that going to be?

The cost of failure

The phrase that most stakeholders in a business venture worry about is the cost of capital. But if you’re entering a business proposition with a close friend or relative, then there’s one more cost analysis that you need to consider – the cost of failure. A failed business venture can not only make you suffer a hard-hitting financial blow, but it can also sever an emotional chain that you hold very dear to your heart. As they always say, choose your business partners wisely; not only is it that extra bit of honesty that you need to look out for in your business partner, but it’s also that lack of emotional attachment to enable you to make cold yet strong business related decisions.

Who’s taking a break first?

Aah! Vacations, a great stressbuster, and who doesn’t enjoy an escapade to an exotic destination with their close ones. But there are two very important questions that need to be answered. Who’s taking that much needed break from work first, and is the office laptop going in the luggage as well? When working with a close friend or relative, planning a vacation can be harder than executing a business deal. You’ll probably end up even more stressed than before by the end of the decision making process.

Office problems become personal problems

A bad day at work means a bad day at home. If your colleagues aren’t the same as your best buddies or close family, that’s great because you can bitch the hell out of your office peeps after a rough day at work. But if you’re business partners with the very people you hang out with on Saturday nights and sit with at the dinner table, good luck with telling them that they’re doing something wrong.

Domestic problems become office problems

If office problems can have a profound impact on your personal life, then things can happen the other way around too. A gruesome fight with your friend at TGIF or across the dinner table on thanksgiving can lead to unpleasant moments in board meetings.

Success too can cause harm

While close relationships are likely to take a hard blow under the pressures of a failing business, they are also likely to suffer under the competitiveness that accompanies a successful one. After all, success come with relentless effort – effort that your business partner may not be willing to put in, or effort that may distance you from your personal commitments to friends or family with whom you’ve entered into business communion.

The lack of expertise

In fact, this is one of the reasons why a number of businesses end up failing miserably. Not only does starting a business with a close friend or family raise a question mark on the way the business will be financed for the better, but it also indicates a lack of proper business sense under a seemingly quick emotional decision. For starters, does the friend or relative with whom you want to start a business really have the necessary expertise for an outlined role under the partnership’s contract?

The worst-case scenario

What is that one thing we do with all our close friends and family members? Yes, we take them for granted. And just for this very reason, you are more than likely to completely overlook the worst-case scenarios that might arise in the long run.

There’s Already Baggage

If two people go into business together, even if there’s a shared personal bond, the crux of the relationship is business. Personal feeling never equal success. When going into business with family it’s almost impossible to not let personal issues creep into the equation. Does your brother really not like your marketing idea or is he pissed because you’re not bringing the family over for Easter? Does your brother-in-law not like the office space you picked out or does he not like the fact his mom might like you more than she does her own son?

Work Never Takes A Break

When starting a company, countless hours are devoted to building it from the ground up, but with anything there are breaks needed to avoid going absolutely insane. Those breaks usually come in the form of down time with the family. It’s hard to have down time with the family when the family is part of the business. If your partner in bed is also your partner in business, the talk of business NEVER goes away. If you’re hanging out at a BBQ, your uncle is GOING to ask how his investment is coming along. You know, that business you’re launching! With family members as business partners there will be not mixing business with pleasure because there will be no pleasure — it will be business 24/7.

Money Makes People Do Crazy Things

Ask anyone estranged from their family what happened and nine times out of ten it has to do with money — who’s got it, who wants it, who died and left it to who and who owes who a ton of it. Making money will turn family into foes. Losing money will DEFINITELY turn family into foes. If you think we’re joking, at the next family function, toss a hundred dollar bill in the middle of the room and see how Uncle Joe Bob and your sweet Grammie react. That old lady will chew your face off for that cash.

You Give Them Way Too Much Credit

It’s easy to fall into the trap of thinking family can accomplish anything. That’s because family usually only shares successes with one another. Every time you fail miserably at something, do you tell your mom or dad? Not unless you’ve got to. It’s easy to assume your brother would make a great partner, look how great he’s doing at work! Well, you think he’s doing great, based on everything he’s told you. What does he do for a living? You’ve got no idea.

If It Succeeds, Or Fails, There Will Be Issues

If you launch the most popular app of 2015, congrats! You’ve got a ton of extra issues coming. If your app was a massive failure, we’re sorry to hear it, but you’ve also got a ton of extra issues coming. In either of those scenarios, it’s best that family isn’t involved.

You lose their money: This is always the biggie. We always hear "Don't invest money you're not prepared to lose," and I'm sure most people do feel that way when they put their money in the hands of a friend or relative. But when that money goes down the drain, people tend to become a lot less philosophical. They may say "Hey, don't worry about it, I took the risk," but in all likelihood, your relationship will forever be tainted -- whether subtly or dramatically -- by the experience. Family money is often said to be the easiest to get, but it can also be the most expensive.

A deal goes bad: A good friend of mine recently did a real estate deal with one of his close relatives. They thought it'd be a hoot and they'd make a few bucks together, never anticipating that anything could possibly go wrong. But when some critical issues came up, they wound up at an impasse that turned ugly and expensive. Let's just say they're no longer as close as they used to be. Just like in any business matter, no matter how foolproof you think a plan may be, it's wise to assume things can and will go wrong. And "family wrong" can be much worse than "business wrong."

The business comes to the family picnic: There are people who can completely shut off work and draw a solid line across their lives when they close the office door behind them. I admire such people, though I know very few of them. The rest of us inevitably bring our working lives home with us in one way or another. When you do business with family and friends, at some point you'll be with them at a barbecue, birthday, cocktail party, or wedding. If there's tension (or worse) brewing between you, aside from your own discomfort, it will affect -- and potentially infect -- those around you. The result can be anything from short-term awkwardness to a full-on Hatfield/McCoy disaster.

You can't un-ring the bell: Once you remove the "arms-length" and start doing business with people who are close to you, you often start down a course that's hard to change or reverse. Whether it's setting expectations (free or discounted products and services), or creating problematic assumptions ("I thought I was going to get a cut of all these referrals"), changing or getting out of friends/family dealings is much harder than business-as-usual.

There's collateral damage: I've been in several situations where I've gotten involved with friends or family peripherally, by networking or making business connections for them. And a couple of times it came back to bite me. I've introduced friends to my own important business contacts, only to have that introduction turn sour. We all like to think that grown-ups can keep clear heads about these things, but again, human nature is such that it's always easy to be calm and philosophical going in, much harder coming out. If you decide to play matchmaker, make sure it's very clear to all parties that you are simply making an introduction, the rest is completely up to them. In fact, I'll often come right out and say (only semi-humorously) "don't blame me if you wind up hating each other," just to put it out there. In fact, if you have any hunch that you might be making a risky connection, it's best to bite your tongue.

 

Collected from various sources

Mzangila Snr