Running a family business can provide a sense of independence but can also come with financial obstacles for which you need solutions. This means that before starting a small business with family members, you want to plan for the difficulties inherent in setting up the financial side of the business. Despite having a great product or idea, you need to assess the potential risks of your future growth and accommodate accordingly. Moreover, setting boundaries at the beginning to alleviate financial problems down the road.
Get a Business Advisor
A business advisor can help the family alleviate the hardship in personal relationships that come from a shared financial responsibility. A business advisor can help your family make the right decisions to plan for the future of your business. For example, many times the family business will have multiple generations working together. In order to segregate finance ownership and management succession without inter family arguments, a business advisor can help set up documentation to ensure equity in the ongoing management of the business. When searching out a business advisor, you need to follow a few guidelines. First, you want to have a plan for the current state of the business as well as the future of the business. Second, referrals are your friend, especially if those referrals come from other family members. Third, make sure that the professional you choose can work with all members of the business not just you. Being able to work with all the different personalities from family to key employees is a must.
Determine the Risks
Even though you have an advisor, you want to make sure that you are aware of the different kinds of financial risks that the business may create. This is why choosing the right advisor is important. An advisor needs to be able to talk to the family while also making an emotional connection. While the idea of risk management seems outside the realm of finances, the business needs to consider the monetary contingencies in the event of a founder’s death. The business advisor should be able to help create a written plan to determine where wealth would go and who would be in charge in the event of a leading family member’s sudden absence. This not only helps protect the business’s finances but can help the family members in a time of stress.
Separate Finances
Running your own business often means that there is a gray line between business finances and personal finances. Perhaps you’re out to dinner with a family member who also works for the company. If you’re talking about business, is this a private dinner or a family dinner? This is when things like intelligent financial solutions. Keeping finances separate becomes even more important in terms of protecting yourself from inappropriate use of company finances.
Protecting the family business’s finances is more than just a money issue. For a business that relies on strong relationships, taking the stress of money out of the interpersonal can make the professional stronger.
