How to Avoid the Pitfalls of a Family Business
Greater numbers of aspiring entrepreneurs are launching businesses every day, and they are dragging husbands, wives, kids, girlfriends and boyfriends with them. In my work evaluating the readiness of founders to launch successful startups, I've seen how the quest for alignment between the business and the family can either enable an entrepreneur's success, or intensify stress and friction on all sides.
A fresh and valuable perspective on this issue comes from Meg Cadoux Hirshberg, author of the book For Better or for Work: A Survival Guide for Entrepreneurs and Their Families. I got to know Meg and her husband Gary at SXSW 2012, where we were all speaking. Gary co-founded Stonyfield Yogurt, now generating hundreds of millions in revenue annually. But Meg Hirshberg's book chronicles the lessons learned during Stonyfield's earliest years, which she describes as "dark" and "disaster plagued." The book also includes what she learned from conducting hundreds of interviews with family members of entrepreneurs, and is full of practical advice for founders and their families and close partners.
In my recent interview with Hirshberg, she identified five common pitfalls of the family-backed startup and how to avoid them.
Hirshberg notes that "many entrepreneurs in the startup phase borrow money from friends and family to launch their ventures. Often they will take a line of credit on the family home. These decisions affect the spouse as well, yet she is usually not consulted."
Most entrepreneurs will find it wise to keep the spouse in the money loop, discussing the pros and cons of different funding approaches and how these options might play out in the future.
Spouse as Employee
"Sometimes the spouse starts helping out in the business," Hirshberg says, "but important matters such as compensation, job description and responsibilities are often not discussed in the manner they would be with a regular employee. This can lead to misunderstandings and resentment in the marriage."
In the event that the spouse begins to play a pivotal role, Hirshberg recommends clarifying responsibilities and assignments just as one would with a newly hired employee.
The Home as a Business
Hirshberg found that her personal experience in housing a seed-stage business was shared by many of her interviewees. "It’s not uncommon for a new business to start in the home, to establish proof-of-concept before any additional rent is taken on," she says. "But a business that may start in a corner of the dining room suddenly expands to inventory stored in the living room, or to a part-time assistant sharing the family bathroom and storing lunch in the family fridge."
Hirshberg recommends openly discussing changes to family life. Make sure family members are aware of what's to be expected as the entrepreneur tries to conduct business while dinner is being cooked and the kids are playing.
The Splitting of Attention
"I think Gary would say that he wishes he’d given me more of his undistracted attention," Hirshberg recalls. "We’ve both learned that it really doesn’t take much. Even fifteen minutes of uninterrupted time–sans smart phone!–can get a couple reconnected." She advises entrepreneurs to treat their family members with all the thoughtfulness they show their most important clients.
Too Little (or Too Much) Communication
Hirshberg remembers that staying in the dark about the status of the business was a kind of emotional survival strategy during the early years.
"Actually, I don’t recommend the path Gary and I took," she says. "We were in a fairly extreme business situation for a prolonged period, so the see-no-evil, hear-no-evil path seemed the best option among bad ones. Even if the business situation is shaky—almost a given during the startup years—the couple should try to find aspects of it they can discuss, like future products, exciting new accounts or positive customer responses."
While Hirshberg doesn't recommend sugarcoating, she advises entrepreneurs to be sensitive to his or her spouse’s limits when it comes to hearing an endless litany of business woes.
How have your entrepreneurial ventures affected your loved ones? What are your secrets to a successful business–and family–life?
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