Last month, we discussed the fampreneur phenomenon and the fact that a lot of moms have chosen to go this route instead of striking off on their own while other family members keep their traditional jobs.
As a quick refresher, that article brought out that “the term “fampreneur” – coined by BusinessesForSale.com, a global marketplace for buying and selling businesses – describes groups of “two or more family members who invest together in a business venture in order to spread the risk while capitalizing on the loyalty and commitment that comes with strong family ties.”
It went on to explain how this phenomenon seems to be a natural progression of the improving economy which is allowing families to more confidently assume the inherent risk of starting a business in expectation of greater rewards.
But, there are always at least two sides to every story and the truth is always somewhere near the middle. So, is there a dark side to being a fampreneur?
Where Family Businesses Go Wrong
Financial risk is a necessary evil in every entrepreneurial venture. In the case of fampreneur businesses, that risk is spread across multiple family members. But, being realistic, that doesn’t usually mean the risk is lessened. Read the global fampreneur report.
For example, if the fampreneur partners are husband and wife, they’re still taking on the full financial risk as a household. This can lead to stress and other related difficulties if things go poorly for an extended period.
Stress is also a factor in starting any business, but let’s face it: we all tend to take our stress out on family more than other coworkers or business associates. When our coworkers and business associates are family, the combination can be volatile.
Emotions running high can ramp up the stress level and create an environment where poor decisions are made or hasty action is taken. Highly emotional decisions are the enemy of smart, strategic decision making for your business.
Once again, no one knows how to push our emotional buttons like family, and we’re good at doing the same to them. Whether it’s anger, disappointment, frustration, or even jealousy, our emotions burn stronger and hotter when family is involved, so you can expect the negative outcomes to be stronger as well.
A failure to plan adequately is also a very common plight in family businesses, specifically when it comes to succession planning. If you’re hoping to start a family business that your children and grandchildren will take over when you retire, the statistics say there’s only a 48% chance you’ll succeed in doing so.
The reason is not because nearly half the children who grow up with family businesses in the household aren’t interested in taking over down the road. It’s because only 29% of family businesses have formal succession plans in place, and most of the other 71% haven’t even thought of it.
In all these cases, fampreneur businesses can and will suffer from the same plights if they’re not handled properly.
How Fampreneur Businesses Can Get it Right
No, it’s not complicated, but it’s also not the easiest thing in the world.
To succeed where many family businesses fail, a fampreneur needs to go into the venture with eyes wide open. They need to understand and accept that all of the above pressures are naturally going to be working against them because they are going into business with family right from the start, and they need to actively work against that natural inclination.
That means making a concerted effort to leave personal matters at home and leave business matters at the job. It means forcing yourself to treat family members just as you would any other employee, coworker, or business partner. And it means taking the time to formalize absolutely every agreement – including a succession plan – legally and in writing so there are no misunderstandings down the road.
By taking this deliberate action, a fampreneur can reap the benefits of going into business with family while avoiding the most common pitfalls.