It’s definitely super exciting having tons of business ideas running in your mind. Of course, like every adventure in life, it’s even fulfilling to picture the people close to you being inclusive in this plan. Here, I want to share some of the steps that I took in setting up a family business which products meet my family needs.
As exhilarating as it might feel, you must remember that you are building a business, not having a family get-together. Some basic rules and principles should be employed from the start to ensure a smooth start and running of the business.
Here’s a breakdown of what should possibly go through your mind when looking to starting a business.
#1. Align your goals
Most family businesses have members who are considered "silent partners". They only invested financially while the day-to-day business running is left in the hands of the idea originator and any other staff or family member employed.
Irrespective of whether or not family members are silent partners, each investor in the business must understand the goal and vision being pursued. The vision must be clear, understood, and accepted with certain compromises.
#2. Business plan
The business plan should be designed to align with the partner(s) desire as to how the business should be structured. It is used as a target chart and scoreboard.
The business plan should typically outline the process to follow in decision-making which is crucial to the running of the business. This is also what they'd review to ascertain how business dealings and decisions taken are correlating with the structured business plan and impacting the company.
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#3. Structuring
Once the goals are aligned, the next course of action is business structuring. Unfortunately, most people skip this part or try to merge it. Most times, it becomes catastrophic, which could make the design planning cumbersome, cluster, and quite overwhelming.
Having the understanding that business structuring is how planning is being started to lay out strategic foundations and directions that could be employed to achieve the business goal is also a remarkable start.
The structuring should be done separately with flexibility of provisions to give room to constant changes such as in techs, economic cycles, competitions, customer needs, and new regulations without trying too hard to get it to fit into the business plan. The business plan should fit into the structuring and not the other way around.
All companies and organisations sure have strong financial policies, but in a family-based business, it is not enough for the financial policies to be robust.
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#4. Foundational principles
One of the challenging decisions involving a family-based business is boundary setting. This is the most crucial part of the establishing process. Here every employed member is made to understand what is expected of them, the policies that are in place, and the corresponding sanctions.
In a family-based business, there is an increased risk of conflicts when the professional and personal worlds collide. As such, every member should be allocated their roles based on their intellect and technical know-how and not based on age and status in the family. Please see a great article on “Starting a family business and sustaining its legacy”.
It is funny and interesting how a lovely family dinner could swiftly turn into a board of directors meeting. This could very well escalate and have a ripple effect on the business. This is one of the major reasons some family-based businesses have a rule against discussing business in the confines of a family social gathering.
"Irrespective of whether or not family members are silent partners, each investor in the business must understand the goal and vision being pursued."
#5. Strict finance management
All companies and organizations sure have strong financial policies, but in a family-based business, it is not enough for the financial policies to be robust. It must be very strict as the risk of misappropriation of funds is significantly higher.
The discussions about distributions of finances are always very tricky. One of the topics to be stressed during the establishment of the business foundational principles is salary and/or profit and loss sharing ratio.
Another aspect to be handled strictly is the investment of the business finances. This should also be strictly based on how decision-makers feel about the business idea being pitched to them and not how they feel about the individual(s) pitching it.
In conclusion
starting a family-based business can help bring family members closer while building something together. However, for it to be a successful business, conscious steps must be taken to achieve that.
This article details the steps that could be employed from the onset to kick-start you in the right direction and give your business a well-formed foundational basis. It does not detail all the steps needed to run the business. To go further into that, you need to do some more research or hire a professional in business management, as this could go a long way in sorting out more questions you’ve wanted to inquire about.
I will also recommend two great articles on this platform — ‘Starting a family business and sustaining its legacy’ & ‘How to sustain the legacy of your family business’ by Sam Edoho.
Lastly, as you embark on a business adventure with your family, endeavour to have a ‘spare tyre’. A contingency plan or fail-safe would ensure the business does not bankrupt within the first generation.
Mmeti Akpan is a network engineer, entrepreneur, writer, educator, and the founder of Mema Family Care—a Nigerian family-owned company that produces quality family care products to homes and businesses.
Mmeti is enthusiastic about fighting unemployment in Nigeria from his experience in numerous industries in Sydney, Australia.
While also putting money back into the economy and rewarding customers with various reward systems as a way of giving back to the society.