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A family business requires planning, cooperation

Posted by Jason Keith  November 22, 2011 06:00 AM

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Families argue, it's just a part of life. When you spend a lot of time together, it's inevitable. But when the families members are operating as part of a small business, the time together is increased, as is the stress, which means the fireworks can really fly.

Family owned businesses are everywhere. In fact, according to the U.S. Census in 2007, there are over 3.8 million family owned small businesses in the United States. That's 15% of the total small business population in the U.S. If you've seen any kind of reality television lately, it's clear that people like to see the ins and outs of family businesses, from Pawn Stars, to American Chopper and Cake Boss. Studies have also shown that family owned small businesses are typically more successful than non family owned entities.

But reality television isn't reality. There are a number of challenges associated with actually running a family owned business, some which television captures. Emotions can run high, feelings can be hurt but success can be achieved. Sometimes working with family is unavoidable, as is the case with inherited businesses, but others go into business with a family member thinking it's the best possible scenario. It's never quite that easy. Planning is always crucial, mapping out the most likely outcomes, but with family members there are always different things to consider when it comes to planning. It can also be the key to success or failure.

"The biggest challenge is ensuring that you preserve the family," said Tom Aley, who founded RapidBuyer, a Boston-based B2B daily deal site aimed at small businesses, along with his twin brother Darr. "You want to go in with your eyes wide open that problems are inevitably going to occur and discuss how you will deal with them – literally have a road map."

Some small business owners suggest that a dominant voice is important to success, because if too many members want total control, there's potential for a power struggle about where the business should go. "The most important factor in making a small family business work, is the way in which the personalities mesh," said Bill Caso, whose family owns a Dunkin Donuts in Chelsea, MA and work together on a daily basis. "If there is more than one family member that needs to be at the wheel all the time, that could be a potentially combustible situation. I am very hands on and need to have my fingerprints on almost every aspect of the business. My sister on the other hand is very deferential."

Having a contingency plan in place is also critical. As an example, if the business succeeds and one person wants to leave, how are they compensated? Are there parameters in place relative to how much of the business they "own," or how much they would expect if they left? If these kinds of questions aren't asked ahead of time, nasty litigation could be the logical way for a departing family member to proceed and get what they feel they have coming to them.

"We always have a contingency plan," Tom Aley said, who has started five businesses with his brother. "Again, this is an issue that needs to be resolved before you start the business. You have a certain ownership interest in the company and if you decide to leave and not work then there has to be some agreed to level of give back of shares."

But in the case of Darr Aley, having to make difficult decisions can also double as being incredibly personal. For example, picture having to lay off your own mother, something he had to do at one point. "In the late '90s when I was a founder at an E-procurement business that was growing more slowly than our investors wanted, we had to lay off about 14 people. My mother was one of them," he said. "It wasn't a full-time position for her but it was still one of the hardest conversations I've had to have. It is hard enough having to ask employees to leave, but your Mom?"

Thankfully, no long lasting damage to the relationship was done according to Aley, but it was obviously a difficult conversation.

Television has done a nice job of showing the glamorous side of managing a family business, but it's also pointed out the stress and strain as well. There's no way of avoiding it. So if a family business is something that could be on the horizon for you, consider proper planning and an agreement on the most important factors ahead of time. It could ultimately save the family, if not the business.

Are you in a family business and have any advice for others considering it? What are the pros, and what are the cons?

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About this blog

Jason Keith has been working for and with small businesses in the New England area for more than 10 years, specifically small, micro businesses. Born and raised in Massachusetts and a former journalist, he provides a unique perspective on the issues facing small businesses locally and nationally.To reach him directly email jasonpkeith@gmail.com.

This is a personal blog. The opinions expressed here are the author's alone.

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