Should I take over my family business or NAH?
One of the questions I get asked all the time is, “Should I take over my family business?”
Let me tell you; DON’T DO IT without thinking through these five things!
Many different scenarios might cause you to be asking that question at this stage of your life.
Maybe you already have a family business with some other members, and they’re transitioning to a different location.
Maybe your parents are getting older, and they started the family business and now need to think about how the transition will happen.
Maybe one of your family members started a business of their own, and now they’re approaching you with a fantastic opportunity, with a short, limited opportunity for you to jump in with them.
Well, first of all, let me say STOP EVERYTHING!
All good con men and marketers know that adding some pressure, time constraints, and perceived limited opportunity to something is what gets people hooked in.
So if you have that situation going on, put the brakes on it!
There’s no business you need to get into or take over that can’t afford to give you time to do due diligence.
You need time to figure the business’s status, where you’re at, what your vision is, and whether or not it’s in alignment with where you’re trying to go.
There are five things that I want you to think about if you are considering whether or not to take over your family business.
1. Your Why
The first thing for you to think about is “what is your why?”
Why do you want to take over this family business?
Is it because you feel an obligation to take over this other individual’s responsibilities? Let me tell you, that’s not a good why, okay? It’s a thing, and you might end up moving forward because of that, but I hope you’ll take the time to evaluate your why in light of the other things I’m going to mention.
2. The Business Status
The second thing you should always think about if you’re considering taking over a business is the company’s current status. You need to know, is this a startup? Is it running? How long has it been operating? Where is there a need for improvement, and where have things been effective? You want to dig into the holes of the company, and there are four specifics you should take the time to get answers to before you take the leap into the family business.
Financials
What’s the P&L statement? What does the company look like from a financial standpoint? Do you know thir EBITDA? Where do they stand in their community? What lines of credit do they have? What type of bank accounts? What kind of expenses, etc. If a company wants you to be on board in an ownership role, they should have no problem sharing their financials with you. If they do, that’s a red flag.
Structure
How is the business currently operating? Is your family member running the business? Are they in charge of the day-to-day operations? Do they have a specific title or role? Is that role specific to them? Would you need to hire other people there? What role will you play, and will they continue to play in that role? Who answers to who, how are decisions made, how does that whole process work? If you don’t know that, it will be tough for you to jump in and successfully take over the family business.
History
What has happened in the past, what has worked and not worked, what failings have they had? What big lawsuits have they had? Are there disgruntled employees or employees who have been with the company for 30 plus years? Don’t focus only on the highlights of their About page, find out about the low times too.
Expectations
What are the expectations of the people involved in the business right now? What are your expectations in terms of being involved in the industry? What are your family members’ expectations regarding their and your involvement? What are the employees’ expectations or other leadership, owners, or partners in the company? Find out everybody’s expectations about this transition that might need to occur and about where they’re at right now and want to go in the future.
3. What You Bring to the Table
The next big category for you to think about is: What do YOU bring to the table in this potential family business venture? If you’re going to take over the business, what do you bring to the table, and will it benefit you and the organization? Here are four areas for you to consider.
Skills and Experience
What’s your previous career history, and do your existing skills and experience lend themselves to the needs of this business? Can you take a job in the company? Should you NOT take a job in the company? If so, do you have the experience and skills to do the job very well? Or, do you need to hire other people to execute certain parts of the business?
Financials
Next, you’ve got to think about your financials. What do you bring to the table from a financial perspective? Are you contributing capital to the company? Are you able to take a reduced payroll for some time or a reduced salary while things settle in? On the opposite side of that, are you in a situation where you live paycheck to paycheck and need that paycheck to happen all the time, or you’ll be destitute? If that’s the case, going into ownership of a family business may not be the right idea now, but a position within the company could allow you to still support and learn the family business while you collect a paycheck and get more prepared for an ownership role.
Network
The third thing you want to think about is your network. Who do you know, and what kind of network do you have to support your role within the business? I’m talking about people who will be vendors, partners, clients, etc, for this business. People who will help you execute the jobs you may be responsible for within that business. Do you have a good network? If you don’t, do you know how to build it or where to go? Think about the value of the network you bring to the table.
Support System
The last thing to consider is your support system. It’s lonely at the top, they say, and it is so true. If you become an owner in a family business, people will look at you differently than they have in other roles in your life. You’re suddenly going to be very special, but not only special, now you’ll be the target of extra criticism, extra eyes, and extra thoughts and opinions about how you operate, what you do, decisions you make or don’t make, etc. You’ll want to have a therapist, a good doctor(s), chiropractic, massage and other care professionals in your corner. Think about your family relationships at home: with your husband, your wife, your kids, friends. Make sure to address the health of those relationships so you can bring a robust support system when you take over the family business.
4. What You Want From the Table
What do you want from the table? Honestly, do you know what your vision is and what your goals are for your personal life? You’ve got to get really specific about this. Here are four areas I want you to think about.
Lifestyle
What is the lifestyle you’re hoping to live? Do you want to go to work from 9:00 to 5:00? Do you want to work 80 hours a week or 20 hours a week? Do you want to travel a lot or spend a lot of time with your kids? Do you want to be at every game and volunteer in their school, or do you want to push yourself in your career? Do you want to be breaking ground in new industries or treading in a well-worn path? Evaluate whether or not this business – right now, in its ideal state, or where you believe you could get it, is in alignment with the lifestyle you want to live.
Income
The second thing to think about is the income you will or won’t get from this business. That can change depending on what kind of a role you get into. If you’re an employee and don’t get ownership, you won’t get profits, but you will get that regular steady paycheck and the other benefits of working with family members. However, if you’re going into an ownership role, you’ll get profit distributions or dividends. There will be a different way that’s structured, and you may not have a day-to-day job, but you also may not get a check every two weeks or whatever. So, evaluate what your income requirements are. What do you hope to bring in every month? What do you need every month? What are you hoping this business will do for you? Evaluate whether your hopes are reasonable compared to the business financials you should have already seen.
Home/Work Balance
When discussing what you want from the business, the third thing to consider is: what kind of home-work balance do you want to achieve? The truth is, in most regular jobs, you can go to work, clock in, do your work, clock out, go home, and you do your fun stuff. You have your playtime, right? Whether with your family member or on your own, your work-home balance is likely to be strongly skewed towards the work side of things if you’re in business ownership. This might not be a problem if you get to work from home or if your work is flexible. You may be able to manipulate it how you want for the lifestyle you desire. But, as an employee, you still get the freedom and flexibility of, “I’m clocking on, doing my job, and I’m clocking out.”. If you’re working with family, it’s a reasonable boundary to say, “When I’m not working, I don’t want to talk about work.” But when you’re an owner, that becomes more difficult, especially if you’re a co-owner with this other family member. You want to be very clear with what you would like to see regarding your home and work balance.
Financials
What are the financials you’re hoping to get out of this family business venture? Are you hoping for X amount of profits? Are you hoping for X amount of dollars per month in passive revenue or monthly cashflow? What are your financial goals? What are you hoping to accomplish, and how does that compare with the actual status of the business?
5. Make the Moves
The fifth and final point you need to think about before taking over your family business is how to go all-in on your decision. If you’ve decided it’s a no for you, that’s okay! Set your boundaries and be strong. You don’t need to volunteer your time to help somebody else build their business, even if they are your family member. There is no requirement that you give up your life and time to help them develop their dream for a future. They can do that on their own and, it’s okay. If they want you on their team, they can pay you, all right?
If it’s a yes, however, you need to think about these details specifically.
Contracts and Deadlines
You need contracts. If you’re going to be in ownership or even if you’re going to be an employee in a family business, you need contracts that specify and outline what the expectations are, what the pay is, how it’s working. It may be a regular employment contract if that’s what you’re doing, but if it’s going to be an ownership or partnership, make sure it’s all laid out. The contracts should cover leadership structure, profit distributions, what will happen in the case of death, divorce, discharge, or disability, and more. Pay attention to the details of contracts and deadlines that you may want to set. Don’t be afraid to add in consequences if deadlines are missed, so it’s not all on your shoulders to move things forward. Every part of the transition team should be contributing their elements in a timely manner. Of course, make sure you hire vetted legal council to help you through these steps. Even though you’re talking about business with family, only a paid 3rd party is guaranteed to have your best interest at work. Other family members would have to be willing to put your interests AHEAD of their own and that’s just not very common in business deals, family or not.
Financials!
Here they come again; number two is the financials. Make sure you have spelled it out within the contracts and everywhere else, how the financials are going to work with you on the team. Again, if you’re an employee, great, what’s your pay going to be? How will raises be negotiated? How can you work on promotions, etc. If you’re going to be an owner, make sure you know how profit distributions will happen and how reporting will work. Don’t forget to spell out the consequences if deadlines aren’t met or outcomes aren’t achieved.
Transition/Succession Plans
The third thing to shore up is the transition or succession plan. You need to sketch out the change management plan for the changes that are coming. If you’re taking over where someone else has been operating for a long time, there are many people that need to get on board. You want that process to go smoothly and not interrupt or disrupt the operations and sales. Best case scenario, I recommend getting input from everyone affected by the changes. Take their input, implement it, create a plan, execute the plan, get input again and again then reiterate and reiterate to consistently do better. The more input you get along the way, the more buy-in everyone has and, ultimately, the better you’re going to do with the process, because many brains makes the job light.
Grace, time, and relationships
The very last is also the absolute most crucial thing for you to consider. You’ve already gone through all the things that I’ve talked about. You’ve made your decision about whether it’s going to happen or not. Now, I want you to remember grace, time, and relationships. Transitioning a company can be wrought with emotional pitfalls, and there are potentially several people involved in the process. People are in different stages of their healing journey. Things will trigger them along the way, and they’ll feel a particular way about this conversation or that, what you did or didn’t do, who said what, or what the financials look like. People may even have shame associated with that. Remember to give yourself and your family members a lot of grace in this process. There will be complex discussions, hard days, challenging moments, hard weeks, maybe hard months, and perhaps some of those things will tell you don’t go into business with this family member because you don’t work well together. But the point is to give grace and prioritize those relationships. It is much better to walk away from a business opportunity with a beloved family member and maintain the tight, loving relationship over time than to jump into business with them, blow it all up, and end up having no relationship and maybe less money. Perhaps you have some more money, but ultimately if you’ve ruined relationships, is that even worth it? That’s for you to decide, I suppose.
Thank you so much for being with me for another week. I appreciate you being with me. I hope you got something helpful out of this. I love you.
Want to schedule a call with me to chat about where your family business is right now and where you hope to get it? I’d love to talk. Schedule Here.
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