About 11 years ago, I started a dry cleaning business with my mom and brother in my hometown of Minneapolis. At first it seemed like a good idea. We had the capital (provided by my mom), we had the community knowledge, and we had the time; in my case, I had just left my job as an international epidemiologist.
However, it quickly became apparent that it wasn't the best idea.
It was right after the passing of my beloved father, and my mom was still deep in mourning. I was getting married later that year. My brother had a baby on the way. There was A LOT going on in our family. In retrospect, I think we were all looking for a distraction from our grief over the loss of my father.
To make a very long story short, the business failed.
Like, really failed. It was a big, costly mistake that had a major impact on the entire family, beyond just my mom, my brother, and me. But while the impact on our personal and financial lives was painful, I did learn some very real, very hard lessons about building a business with your family. For starters, families thinking about going into business together should schedule a least one session with a therapist (you'll see why I say this later on), and they should seek input from the cheapest, most competent lawyer they can find right from the get-go.
All of these lessons could be summed up as half a dozen questions I wish someone had asked my family BEFORE we decided to go down this path of business ownership. I've shared them below, with tips on how to arrive at the suitable answer for your family.
Question 1: Is this the right time?
We started our dry cleaning business literally a week after my father's funeral. Was that the best time to start a business? Probably not. Whatever unresolved issues you have in your family-- grief, resentment, jealousy, etc.-- they will creep into the business, even if you aren't actively engaging with them at the moment.
Tip: Sit down with your partner(s) and write down all your major family issues (be HONEST), and discuss how to keep them from affecting the business. Develop a contract with everyone involved, clearly spelling out each person's role and devising a "fairness" clause, one that says family members cannot bring personal issues into the business.
Question 2: What role does each partner play in our family?
Your role in your family is the role you will play in the business. It doesn't matter if you have an MBA from Harvard and were Employee #6 at Google. To your family, you're li'l sis/mommy/cousin/pookie, etc. It can be very hard for family members to see each other in roles other than those they play within the family. In my case, my role was that of the prodigal daughter. I had been away at college and graduate school for more than 8 years, coming home for holidays but never really staying for longer than a few months. My family didn't know me anymore and I really didn't know them. I didn't realize (in my defense, I was in my early 20s) how coming back with my East Coast bravado, giving orders to the people who gave orders to me for 18 years, would affect them.
Imagine your baby girl questioning your leadership decisions or your little sister giving you career advice. What I needed was to step back and let them get to know me and vice versa. But of course this didn't happen--like I said, I was a cocky 20-something.
Tip: Hire an objective outsider with absolutely no connection to the family to conduct interviews with each of the partners to help determine who is right for what role. It might even be helpful to have a therapist do this, as opposed to an overpriced "business consultant."
Question #3: What is each person's risk tolerance?
The concept of risk is vastly different for everyone, and having a clear discussion with family partners about how they view risk is crucial before jumping into a business together. When we started our business, my brother had a wife, a mortgage, a toddler, and a baby on the way. I was a newlywed with few expenses other than student loans. Our risk profiles were very different, yet a majority of the day-to-day stress was placed on my brother as the COO--on top of the responsibilities of being the "man" of the family and having to handle his own grief. It's true testament to his strength and that of his wife that he survived. As his partner, I should have understood how much riskier the business was for him than for me.
Tip: Have each partner take out a sheet a paper and create two columns: Responsibilities and Importance. In the Responsibility column, write down each of your responsibilities (e.g., children, mortgage), and in the Importance column write down how important it is to you. For example, for some, the stability of owning a home is very important, while others value the flexibility of a rental. Owning a home presents a higher financial risk because it's much easier to break a lease than a mortgage.
Question #4: You love your family, but do you LIKE and RESPECT your family?
There is an enormous difference between seeing your family on holidays and working with them every day within the stressful context of building a business. You have to like to spend long, extended periods of time together AND you have to respect them. If there's any hesitation, DO NOT start a business with them.
Conversely, you might find out that while you enjoy spending time with them, you might not enjoy working with them. I'm a bit OCD when it comes to exceeding expectations, and I thought my family understood this (once again, the naivety of a 20-something) and recognized that it was how I became so successful. But I am sure it appeared, at times, as if I was a bit of a "know-it-all". I suspect if my brother were to be completely honest, he would not include me on his list of favorite people at that time. Again, in my case, a lot of the issues stemmed from not really knowing each other and our capabilities. I think if my brother could have seen the process, the work, and the sweat it took for me to be me, he would have had a different perspective on my work ethic and why I was so driven.
Tip: Ask yourself this question: Could I spend 18 hours straight with this person? If the answer is no, you might want to reevaluate the partnership.
Question #5: Does everyone have the same goal?
Make sure each person involved understands why you're all starting this business, and confirm that you're all on the same page. Though it might sound counter-intuitive, not everyone goes into business to make money, and differences on this front can cause BIG problems. For example, my mother saw our business as a way to continue and grow the legacy of my father, while I saw it as a way to make some serious money (which also furthered the legacy of my father). Those are two very different visions. I think if we had sat down and clearly laid out each of our visions, things might have turned out differently.
Tip: Write down all of the reasons for starting your business and have every partner sign it.
Question #6: What is My Breaking Point?
Know this before starting the business. Recognize the point at which you're willing to walk away in order to maintain your relationship with your family. I left our business because I saw the impact it was having on my relationship with my brother and my mother and I realized that it was far more important to me to be loved and liked by them than to make a buck. Interestingly enough, it was right after this that I started The Budget Fashionista.
Tip: Write down your price--the line that you will not cross. It could be anything from missing too many of your children's events to purposely avoiding family gatherings because of the stress of the business. Do a gut check every few months to make sure you're not paying that price.