There are some pretty good positives about doing business with family. First, you know them and should know their capabilities. Second, there should be strong loyalty bonds between family members. I have personally had some success doing business with family members. Of course, I have also had some failures. Here are some things to recognize when doing business with family members.
First, remember that you will always be family even if your business venture does not work out. For some, this creates hard feelings when a business doesn’t succeed or people don’t perform as expected. Communication and clear understanding is essential in this situation.
Second, make sure that you have proper internal controls in place so there are no temptations for one of the partners to “borrow” from the business without telling the other partners. We also have a course on Internal Controls in our School of Wealth Strategy. Finally, be sure there is good reporting and that everyone understands that this is a business and not a charity.
If you are lending money to a family member, the best thing to do is to think of it as a gift. Don’t expect repayment. Then, if you do get the money back, then you can be pleasantly surprised. If you don’t, then it’s no big deal as you considered it to be a gift in the first place.
Family business endeavors can be challenging. They can also be rewarding to all parties and actually increase family bonds if done right. And the only right way is to treat them as a real business and have all of the business controls and communications in place. Too often, because it’s family, we make assumptions and we all know the result of what happens when we ass u me.