If you are considering starting a small business, the implications stretch beyond the impact on your life and will also touch the lives of the people you love.
Your becoming an entrepreneur affects your family in a variety of ways, even if they are not technically your business partners on paper. Here is how to ensure that your familial relationships will survive the rigors of small business ownership.
Taking on a Family Member as a Business Partner
If you are starting a new business with a family member as your partner, it is important to remember that the best practices of entrepreneurship still apply. Sitting down with a business partner to discuss your vision and goals is the first imperative, no matter who that partner may be. It is a red flag if that partner does not have the same business goals you do.
Consider objectively mapping out your reasons for the partnership. Sit down to contemplate, and potentially discuss and document:
- What are they bringing to the business that you lack? Is it money or experience? Do they have business connections you are lacking? Or is it simply that you want a trusted advisor beside you as you launch?
- Will that characteristic or selling point justify their equity stake in the business? What is the appeal of this business partner beyond the comfort of not going it alone?
- How much skin in the game should they have to counterbalance their ownership of your company? Are you asking for an up-front investment?
- How do you both feel about risk-taking? This will affect your business spend on things like advertising, launching new products, or taking on a business loan. Get in sync in these areas before the business takes off.
The process of objectively considering the value of your potential business partner should be the same no matter your relationship. It is an area in business that is too often left to chance but failing to establish an upfront understanding will lead to big problems and potential hard feelings down the road—particularly if you are successful.
It is also incredibly important to map out partnership responsibilities if the family member partner is a spouse. Most marital relationships do not need the added stress of arguing over business task ownership, so make sure this is defined upfront and you both agree.
Addressing Your Entrepreneurship with Your Family
Even if your spouse or family is not expecting to be involved in your business, it is likely they will be involved at some point. Best practice entrepreneurship tips suggest sitting down with your spouse and family to talk about how the venture will affect their lives. Consider:
- Will the family budget tighten during the leaner start-up years?
- Should your spouse consider increasing his or her revenue streams to offset the potential loss of salary as the business launches?
- What about health insurance and benefits?
- Will your spouse be more responsible for family or home commitments and responsibilities if you are spending more time on the business?
- What are the benefits (for every family member) of making the entrepreneurial leap?
- What are the sacrifices (for every family member)? Will you give up vacations for a few years or cut back on holiday gifts?
- Where will the new business add risk to your current assets? For example, will your home be tied to a business loan? Are you using retirement savings as initial capital?
It is common for the spouse to inadvertently become involved in the new business start-up. This may place your loved one in a role they feel like they never signed up for and it can cause resentment down the road. Engaging your spouse and road mapping crucial details, from initial expenses to down-the-line profit, will eliminate misunderstandings that could cause problems in your relationships with those you love.
You can avoid many of the pitfalls associated with starting a small business, but it requires deliberate thinking, planning, and discussion with business partners and other family members. Benetrends can help. Download The Definitive Guide To 401(k)/ROBS Business Funding to learn more.