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How to Start a Family Business

 Throughout history, family businesses, from corner shops to multinational corporations, have been instrumental in shaping economies and creating socio-economic growth. Yet starting a family business is not an easy thing to do. It requires the management of some dynamics that you don’t typically find in other types of businesses. 

While the allure of working closely with loved ones is enticing, it is essential to navigate the unique challenges that come with running a family business. Some of those challenges can be avoided or minimized if you are proactive when setting up the business and are diligent in running the business the right way.

The journey of establishing a family business is as much about understanding human connections as it is about mastering business strategies. Although sometimes a daunting undertaking, starting a family business can be an incredibly rewarding experience. If you’ve ever dreamed about running a family business, this article will help set you on the right track.


What Is a Family Business?

Any business owned and/or managed by a family is considered a family business. You may be envisioning a local “Mom ‘n’ Pop” shop, but there are also some major corporations that are family-owned. You might be surprised to learn that Walmart, Ford, Chick-fil-A and BMW make that list.

Pros and Cons

Like any other business, family-run companies have their fair share of benefits and risks. For example, the dynamic you have with other family members can make or break your business, and sometimes your relationships. When the pressure gets intense at work, tension, and resentment can build up if left unchecked.

Your relationships take priority when running a family business. When everyone feels motivated and valued, communication is more effective and everyone works harder. Productivity and profits align directly with the energy you and your family members are putting out.


Building a Family Business

Family businesses often come from humble origins, but they still don’t succeed overnight. Well-educated planning is as valuable as hard work in the creation of a successful enterprise. Here are some things to mark off your checklist when you’re looking to start a family business.

1. Start a Dialogue 

Should you even start a family business? This is one of the first questions you and your family members should ask each other. This question should start a dialogue that will help the family decide if a joint venture is worth pursuing and what would it look like if you pursued that goal.

Communication is critical, especially in a family business. You’ll be working closely with loved ones every day, so it’s important to consider their opinions. If you’re uncertain what industry you’d like to pursue, sit the family down and discuss it as a team. Helping everyone feel valued and included will bring you together and strengthen your motivation to succeed.

Don’t be afraid to ask questions and collect feedback from everyone involved. Ideally, each family member should be excited to start the family business. Everyone has something unique to offer; it’s important to hold space for everyone’s thoughts and ideas.


2. Choose the Right Business Idea

One of the most important steps in starting any business is selecting the right one. This means a business that is the right fit for the family and has a chance to succeed. While it seems like this should be one of the easiest steps, it can often be one of the most challenging.

The idea that is chosen should resonate with everyone who is going to be a part of the business. Each person should be passionate, enthusiastic, and/or knowledgeable about the product or service the business is going to be offering. If not, you may find some members getting discouraged, bored, or overwhelmed by the responsibilities and tasks needed to grow the business.

Another thing to consider when choosing the right business is how well it fits into each person’s current life and goals. While some family members may be able to work on the business full-time, others may have financial or time responsibilities that prevent them from going “all-in”. Be sure that the business can still operate under those circumstances.

There are many great businesses a family can start. Choose the right one to give yourself and your family a head start towards its success.


3. Evaluate Strengths and Weaknesses

Naturally, everyone has their own strengths and weaknesses. Part of starting a family business means understanding where various family members excel or struggle. You want to play to everyone’s strengths and highlight their talents.

For example, if one family member is particularly gregarious and funny, they might do well in a customer service position. Likewise, another family member might be more reserved, but excels at organizing, and might do better with inventory assessment.

Fortunately, running a family business reduces the time spent interviewing external hires. However, that also means you’ll need to exercise patience with your family as they learn the ropes of the new business. Keep an open mind – be willing to explore different options until everyone has a role suited to their abilities.


4. Assign Roles

To prevent potential confusion later on, it’s important to assign family members roles early on. These roles may change later as everyone gets comfortable with different tasks. Find a common ground between what people want to do and what they’re skilled at.

Each role should come with its own “job description”, or a list of responsibilities. The family business requires a team effort, so everyone should share responsibilities evenly. Try to make things as fair and reasonable as possible. Overloading one person’s plate can create a risk of burnout.

Make sure to actively communicate with family members and ensure that everyone feels comfortable with their job. If there are disputes, try to work them out before opening the business. You want the opening day to go as smoothly as possible.


5. Define Expectations

One of the many notorious pitfalls for many family businesses is conflict within the family. This can be brought on by many things, but perhaps the most common is unclear expectations. Miscommunication can also lend itself to this dilemma. A great way to prevent this is to make sure that everyone’s responsibilities are defined clearly. Better yet, write them down.

Among other written expectations you might want to consider an attendance policy. If you’re having qualms about creating too “corporate” of a setting, consider the fact that every company requires structure. Even within a family business, some boundaries prevent disaster and disruption.

Here are some other expectations you might want to consider when forming a family business:

  • Appropriate on-the-clock dress code
  • Attendance (calling out, coming in late, etc.)
  • Appropriate workplace behavior and language
  • Breaks and/or PTO
  • Policies regarding external hires
  • Payday and payment methods

Keep all of this information on record in writing. Store these files somewhere safe, where they can be consulted if disputes arise later.


6. Talk About Compensation

Don’t be afraid to jump right into the conversation of pay. Although some consider it a sensitive topic, payment is important, and it’s information all employees deserve, family or not. Start the conversation by asking what everyone thinks is reasonable compensation. Negotiate from there. It can be helpful to start at a base rate and later increase it based on the store’s success.


7. Create an Exit Strategy

While it’s great to dream big, there’s no shame in devising an emergency exit strategy. Family-owned businesses often start as a new and exciting opportunity, but can often become stressful fast. The pressure of a fast-paced work environment is tough. Additionally, sharing the same space with family members all day every day takes a toll on everyone at some point.

Communicate as a family regarding your limits. Discuss how you’ll communicate with each other if the stress of the family business gets too intense. Consider what steps will need to be taken if someone leaves. For example, if one family member might choose to attend college later on, try to create a contingency for that.


8. Consider a Succession Plan

One critical mistake many family business owners make is not setting up a succession plan. The key element of running a family business is – you guessed it – the family. It’s one thing to run a successful business, but it’s another feat entirely to keep that business running for generations.

Don’t simply foist your family business onto the next of kin once you retire. Instead, temporarily hold the seat vacant. Leave room so that anyone could potentially become the successor. As time goes on, you’ll be able to observe family members more. Get a feel for everyone’s passion and work ethic before settling on a successor. You want to choose the best fit for the job, not just the next in line.

It can help to take the time to write this down and create a documented plan. Have everyone sign to agree with the terms you set, and discuss it as a team.



Running a family business isn’t for everyone. There are many challenges involved in running this type of operation. However, with a thoughtful strategy and the right amount of teamwork, anything is possible. You can achieve your dream of building a family empire with the right plan in place.


Also read:

Should You Start a Family Business? Here Are 6 Things to Consider

12 Family Business Ideas Any Family Can Start

10 Challenges of Running a Family Business


Ari Bratsis
Team Writer: Ari is a writer, blogger and small business owner based in Washington state.

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Find Your Way · Grow Your Business · Sales · Your Mindset

Team Writer: Ari is a writer, blogger and small business owner based in Washington state.

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