We are family — but are we business?
Families are the smallest units in our societies, but, if they engage in business, these units provide stable economic power based on personal relations. Let’s see whether this is a recipe for success!
Families that made business history
When mum and dad decide to open a little corner shop or cousins embark on a startup adventure developing software in a garage, they share this journey with many ventures. Family businesses are the backbone of the global economy, with two-thirds generating around 70-90% of global GDP, according to 2017 data from the Family Firm Institute.
Some of the newcomers will also share the humble beginnings with many top global enterprises of today. US discount chain Walmart, a steady leader of all business lists, was founded by the Walton brothers in 1945 and now has a revenue of USD 514bn. Europe is not far behind with Germany’s Volkswagen, of the Porsche and Piech families, with a revenue of EUR 235bn. Other well-known brands like Novartis, Dell or Aldi, also trace their origins back to families like Sandoz, Dell and Albrecht.
Some essential advice
When it comes to founding a new business, doing so with family members seems like a safe bet to ensure a high level of trust and commitment and achieve a lower level of costs. Some are even fascinated by the idea that their family name might someday become famous and make history.
That hasn’t changed with the coming of the startup age. Meanwhile, a family venture has always come with its specific challenges. But how do you avoid the pitfalls and make the venture a success?
- Business is business: Set clear limits about where family life ends and business begins. Determine roles, communication, and pay according to market standards and not personal feelings. The best thing is to put everything in writing. Seeking outside advice might help in more problematic cases.
- Define your family values and stick to them: PwC’s Family Business Survey says that clear values are the best way to overcome today’s challenges of digital disruption. A commitment to your values helps to focus your activities, navigate complex decision-making situations and wins the trust of your customers.
- Plan for succession: If you have a vision of growth, you must plan for the times when decisions will not be made by you and your first partner(s) alone. Very few family businesses make it through the third generation, and the main reason for that is poor planning, according to EY and University of St. Gallen’s Family Business Index. A governance framework established early is a tool to prevent the breakdown of relationships and secure a stable background for future generations.
If you and your family members have equal understanding of your goals and how you want to achieve them, starting a business with family can be a good idea and the beginning of a rewarding journey.
Written by Anikó Jóri-Molnár