FROM CREATING LEGAL AGREEMENTS TO SETTING BOUNDARIES, THESE STEPS CAN HELP REDUCE CONFLICT IN SMALL BUSINESSES STARTED WITH FAMILY OR FRIENDS
When companies started laying people off last year due to the pandemic, Angela Civitella, a business leadership coach and founder of Intinde, noticed a trend. She saw increasing numbers of new small businesses being started by families or groups of friends.
Now she’s noticing another trend. Many of those small businesses are struggling or are crashing and burning.
Starting a small business is hard enough. AdvisorSmith, which produces research on small business success, crunched data from the U.S. Bureau of Statistics and found that 22% of small businesses across the country fail within the first year. Thirty-two percent failed within two years of starting, and 50% failed with the first five years of opening their doors.
When you add the pressures that come with starting a business with family members or friends, the chance of success becomes even harder to achieve. Civitella, however, says that doesn’t have to be the case. So she’s come up with 11 tips to reduce the potential for disaster and increase the likelihood of success.
1. SET RULES AND BOUNDARIES EARLY: The key is to write down what each party expects so you can be on the same page from the beginning.
2. CREATE A LEGAL AGREEMENT: This is different from the one described above, as it has to do with what each person is putting into the business with respect to investments, including money. It also will usually spell out what happens in the event the business is dissolved.
3. RELATIONSHIPS COME FIRST: Always put your relationships first before business. Let this rule be the guiding light in how you deal with family and friends in your business.
4. RELATIONSHIPS COME FIRST, EXCEPT WHEN THE BUSINESS COMES FIRST: If a family member who is part of your business does something wrong — such as commits fraud or steals from the business — you have to act quickly and get rid of them. If they don’t care about the business, then you shouldn’t care about keeping them around. Period.
5. DEFINE WHAT SUCCESS IS: Make sure you and other stakeholders know what you are working towards and what types of successes to expect. For instance: one person might de ne success in terms of money, while someone else might see it as feeling ful lled or helping as many people as possible.
6. TALK ABOUT TIME COMMITMENTS: Everyone should know how much time and effort it will take to reach success. Set a wide window, even if you’re sure it won’t take that long. It usually takes more work and more blood, sweat and tears than most people realize.
7. DON’T BE AFRAID TO DISAGREE: Disagreements should never be personal. They are simply part of how a business works and should be treated as such. In fact, it can even be healthy to have opposing views work together to create solutions.
8. BECOME A GREAT COMMUNICATOR AND AN EVEN BETTER LISTENER: It is imperative to hear what the other person is saying, and it’s equally important to be clear when speaking to other people. Your point will only be heard when you make the other person feel like they are truly being listened to, so listen attentively.
9. DON’T TALK ABOUT WORK: If you are working with family and friends, learn to separate your work life from your home life. Your relationships will be better for it — especially if you work with a spouse.
10. THINK ABOUT CULTURE: If you’re starting a business with family and friends, create a shared vision. With that in mind, you may have to be more exclusive when selecting your business partners than you originally intended.
11. DON’T BLAME OTHERS: Take responsibility for your choices and actions. You have a responsibility to make decisions and live with them. So be accountable, and never point ngers. And above all, nd better ways to learn from your experience
While Civitella advises that it’s best to take these steps before you start a business, she’s also quick to point out that it’s never too late to stop and set these steps in place to keep your family relationships and friendships — and your small business — headed in the right direction.