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Start your family business the right way
Starting a new business from scratch can be fraught with the fear of the unknown and perceived risks both financially and on a personal level. Adding the fact that your business partner happens to also be a sibling can often only heighten these concerns. Indeed, we are often advised never to mix business with family and there is never a shortage of people to highlight the pitfalls of such a decision. But can a family business arrangement work?
The founding members of The Home Cloud, a new forward-thinking estate agency based in Berkshire, are certainly hoping so. Director, Tom Jewell, has been joined by his sister Cara Treadwell in setting up this new venture. Coming from a home well versed in the intricacies of family business, they have taken careful measures to make sure this is a relationship that flourishes.
It would seem that entering into a family business with extreme caution is a wise move. Indeed, there are many high profile disaster stories of family feuds and spiralling profits, resulting in lengthy and bitter legal disputes.
The Koch brothers
In an article in the Financial Times, Luke Johnson draws on an example of the billionaire Koch brothers. This dispute arose over allegations of fraud and blackmail, lasting 20 years and costing millions of dollars. The troubles of the Koch brothers clearly delved deeper as a result of their family background. As Johnson recalls, one of the brothers claimed the other had bullied him as a child and that being cheated out of millions of pounds worth of assets was simply a continuation of this treatment.
However, it is not necessarily all doom and gloom for siblings when looking to start a business together. There are numerous success stories out there as well.
The Candy brothers
A prime example of an effective sibling partnership is that of the property developers, Christian and Nick Candy. Having bought their first flat in London with a small loan from their grandmother, the brothers worked their way up the property ladder by renovating flats and selling them on in their spare time. Eventually in 1999 they were able to establish Candy & Candy and have since had hugely lucrative development projects such as One Hyde Park. In 2010, they were estimated to have a joint net worth of £330 million.
The Home Cloud
At The Home Cloud, Tom and Cara have had access to a wealth of experience and advice when setting up their estate agency business. Their father and uncle had run a successful gas business for years and were there to offer valuable pointers along the way. Having also gained notable experience working for firms such as ThamesView and Strutt and Parker, Tom and Cara were able to put together an effective strategy to make the start of their business life together a harmonious one.
1. Get all your ducks in a row before launching your business
When a family is involved, it is easy to fall back on a sibling partnership whereby verbal agreements will suffice. It is important to try and avoid this temptation and follow the correct legal and contractual channels of starting a business. Whether it be salaries or shares, for example, it is vital to come to an agreement, in writing, that all parties are happy with to avoid bitter disputes further down the line.
2. Have clearly defined roles within the business
It’s vitally important, as with any business, that all parties have a clear understanding of where their strengths lie and what their role is. One must put aside any childhood history or a balance of power and make sure that you are getting the best results out of the partnership. The Home Cloud sees a clear division of duties as Tom has drawn on his experience in valuations and pitches, for example, whereas Cara has focused her time on the marketing of client properties and the business as a whole.
There is one caveat to this is, however, in that there is also a need to work effectively as a team and consult one another on all decisions.
3. Effective communication
As siblings, it is easy to fall into the trap of assuming you know what the other is thinking. Once again, it is important you try and detach yourselves from family ties and treat your working relationship as you would with any other business partner. Tom and Cara have put in place regular meetings and have set aside time to chat generally about the business with an aim of avoiding this pitfall. They have put a huge emphasis on constantly reviewing every aspect of the business so that their familiarity with each other doesn’t allow for standards to drop and things to be missed.
A sibling relationship can, of course, work positively on this note. Tom and Cara’s understanding of each other allows them to be blunt about the business without causing offence and it allows them to remain calm in pressure situations.
4. Find ways to enjoy time as a family away from the business
To avoid the business becoming stale and creating a negative impact on family life, it is useful to have methods of completely switching off from company matters when out of the office. Avoiding the temptation to talk business at family gatherings is harder than it seems, however, it is vital for your own sanity as well as that of your family’s!
5. Do not be afraid to allow other people into the business
A family business can be a very personal entity, particularly if it is something that has been built up from scratch. However, for the company to grow into the future there may well come a time when you need to loosen the reigns and allow others to join the venture. Having the resources you need is paramount to the ultimate success of the company.
As we can see, there are clearly dangers associated with starting a family business; there will always be disagreements between siblings. Indeed, Stephanie Brun de Pontet from the Family Business Consulting Group, astutely observes that “the knowledge they have of each other will allow them to poke each other in the most irritating ways”.
However, there are numerous success stories out there and with some discipline and careful consideration there is no reason why the future shouldn’t be bright for a family business.