How to Start a Family Business Without Blowing the Family Budget
Posted by : Premraj | Posted on : Thursday, June 11, 2015
DELICIOUS
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REDDITThe idea of running a family business is an incredibly romantic one. Day and night, family members can spend quality time with one another working toward a successful future everyone will enjoy. However, the rose-colored images of family-run shops require much more planning than dipping into savings and hanging up a shingle.
A family business must be a finely tuned machine, using each family member’s skills to the utmost. Meanwhile, families must become finance experts to ensure a business’s expenses don’t leach from personal savings. Here are some tips to keeping the business and family separate in a family-run company.
Avoid Bootstrapping
The most important first step for a burgeoning business isn’t deciding on a name or finding a location — it is obtaining funding. The old adage is true, it takes money to make money, and modern small businesses require a sizable chunk of change to get off the ground. Fortunately, there are dozens of ways small businesses can find the funding they need for rent, utilities, supplies, and equipment. Unfortunately, many small businesses choose not to take advantage of any of them.
“Bootstrapping” is the affectionate term businesses use to describe paying a business’s substantial start-up costs out of the owners’ pockets. For families looking to start intimate shops, bootstrapping, which avoids expensive loans or persnickety investors, may seem like the best option. However, bootstrapping requires a family to essentially drain every penny of savings, from college accounts to retirement funds, on a risky business venture, and ultimately it makes a single family liable for any financial disasters that occur.
Spread out the Risk
Instead, businesses should recognize the value in spreading out the financial burden amongst multiple investors. It is possible to maintain the designation of “family-owned and operated” as long as the family holds the majority share of the company. Therefore, many family businesses are at least partially financed by outside investors. Alternatively, family businesses can seek aid from more distant relations; for example, a family business owner can ask siblings or cousins to become investors. With multiple stakeholders, a nuclear family’s risk is considerably diminished.
Be Generous and Stingy
Much of the charm of the family-operated business comes from the simple community-oriented culture within it. Customers and clients tend to flock to family businesses because they desire a kind of care and attention bigger companies can’t provide. Thus, to be successful, family-run businesses must be generous with customer service, offering customers unprecedented familiarity and friendliness.
However, when it comes to money, family businesses can’t afford to be so open-handed. Businesses can’t allow free or discount services simply because they feel comradery with their customers. This isn’t to say that the cash registers should be a hostile place. Instead, families should remember that their business is their only source of income, and by offering deals, they are directly impacting their monthly home budgets.
Be Committed
Every business requires commitment to succeed. Even major corporations need employees who are loyal and trusted advocates of its products and services. Family businesses require all participants to be enthusiastic and devoted to success. It takes money, energy, and time to create and run a business, and one family member can’t accomplish it without help.
It is beneficial to assign different family members certain major responsibilities. For example, one member may be based in the office, keeping the accounting books organized, while another goes on trips to fairs or markets — mobile credit card reader in hand — to attract a larger audience for the business. Family businesses should allot tasks based on innate talents and spoken interests to ensure support and success.
Include Outsiders
In the beginning, most businesses benefit from staffing low-cost family members. However, as venture grows, it needs staff, and eventually even family-operated businesses will have to hire outsiders. Non-family employees may feel uncomfortably alien after years of family-only service in the company. Businesses will need to instruct their outsider employees about company culture and attitude to maintain a unified front. Still, non-family members can provide insight and experience that a business needs to succeed. It may even be beneficial to promote non-family employees into higher positions around the company; for example, an outsider’s perspective is particularly valuable in marketing and communications.
Starting a small business is hard enough, but forming a functioning company out of the family is a terrifyingly thrilling process. Maintaining separate business and household budgets and bank accounts is a necessary step in having satisfying and successful work and home lives. With determination and cooperation, any family can build a legacy business to be proud of.
