Starting a family business can be one of the most rewarding and challenging adventures for an eager entrepreneur. The combination of building something sustainable and getting to spend time with the people you care about the most — your family — is a great combination. Of course, it also comes with plenty of challenges. As you think about starting a family business, you’ll need an answer to each of the following 6 questions. Let’s walk through them together:
1. What unique experience does your family have?
As you consider what type of family business to start, it’s important to consider what unique experience or skills your family has. Ideally, you want to find a competitive advantage, i.e. something that your family can do better than others. This might come from a family member’s previous career, or you may be starting totally from scratch, and that’s ok too. Starting any business comes down to finding a niche that the entrepreneur is interested in and identifying problems to solve for customers in that niche.
2. Which family members would participate?
If you have an idea to pursue, the next question is to determine who will be involved. If you are starting a family business, your family member are the most important assets. Which of them would be willing to join the business from the start? Are there others that would want to see how it goes in order to minimize risk before quitting a full time job to join? If a family member joins too early and gets frustrated with the slow progress most early startups go through, that can create tension outside of work.
3. How will you fund the initial operations?
Perhaps one of the most important questions is where funding will come from in order to get started. Some businesses, like consulting, may not require much capital to get started. Others, like a physical storefront, require quite a bit of cash to get off the ground. If you are funding the business personally from family savings or contributions from multiple members, consider the risks and conflict that can come up if the business is not successful. To be sure, I’m not advocating against family members investing in the business, but I do recommend you consider the option carefully and proceed with caution.
4. Are you and your family comfortable with the risk?
Following on the question of funding comes the question of risk. Starting a family business is inherently risky, and there are many pros and cons. The business could fail, family members could lose money, you could lose career momentum, and worst of all, business conflict could create conflict between otherwise peaceful members of your family. Consider reading this article about working in family business to understand important steps to take for your own business.
5. Who outside the family would be willing to help?
It’s unlikely that you’ll have every skill necessary to start a family business if you only hire family members. Successful family business entrepreneurs always go outside to find others that bring unique perspective to the team. Family business owners need to hear the truth and get unbiased perspectives from others that aren’t worried about hurting their feelings. From the start, who may be available to help get the business started and provide that unbiased, outside perspective?
6. Do you have the tools necessary to get started?
Finally, starting a family business requires tools. Some tools are more conceptual, like a good management approach, while others are more tactical, like communication software. To get started, consider what other software tools might be necessary, such as a CRM, accounting platform, and content management system for your website.