Family Business Strategy: Working with Your In-Laws
Are you thinking of partnering with your brother or sister-in-law? Before jumping into partnership with your family members, it is absolutely key to think through the parameters of your working agreement. Working with in-laws is no different, and agreements with your brother or sister-in-law requires similar considerations of family dynamics that you would contemplate when working with other direct relatives. Thinking about these questions early will only make the future of your enterprise smoother and more successful.
Here is a quick guide of considerations.
Clarify the Shared Vision Coming together with a collective, clearly articulated vision will make everything else feel easier. No matter how complex or entangled things become, you will always have this foundational philosophy that you can return to. Clarifying the vision isn’t an abstract process either, it involves asking yourselves practical questions including: “what is our current business model?”; and, “are we clear why and where we make money, or where and why we do not?” With a shared vision for how your business could grow, the action-oriented questions like how and where you make investments become infinitely easier to agree on.
Communicate & Plan It may at first appear obvious that communication and planning are necessary considerations in any new working relationship. But when family connections are involved these can often be taken for granted. Have you discussed:
1. Management Control: How will you divide management and control of the firm? Can you agree on which part of the business each of you will manage? What will you do when you disagree about issues that have an impact on both or all of you, and who has voting control?
2. Establishing a Board: Have you considered establishing a board for your business? It is helpful to get outside perspectives on your company and a Board can be an ultimate decider for issues that you do not agree on.
3. Ownership & Economics: Who will own the business? What kind of return does everyone expect to receive? Have you identified your list of “ownership” issues (i.e. sale, acquisition, new partners, dividend level, family involvement)?
Discussing and agreeing on these questions is best followed by the documentation of your decisions in a Shareholder Agreement that also includes a buy-sell agreement. Avoid the possibility that anyone feels trapped.
Be Thoughtful, Talk Details Work through all the conversations these questions will invariably demand before you quit your day job or make any dramatic changes. Have regular executive team meetings to focus on initiatives to grow revenue or reduce expenses. These are not only important for future-proofing your planning and establishing clear lines of communication but will also help you and your in-law(s) learn and grow in your working relationship.
Talking details is an important strategy as you approach your new working relationship thoughtfully. The minutia can turn into big hurdles if they are left unexamined. Get down to the specifics: compensation, bonuses, vacations, perks. Talk about it now, before it becomes an issue.
Future Proof the Plan Effective planning is not only about where you are going, but also where you are coming from. Contemplating how the senior generation will transition ownership or control to you, and what their needs and expectations are and will be in the future is an important part of the business plan.
Good working relationships are not always immediate, but they can certainly develop and grow with conscious effort and a thoughtful, thorough approach. Following a guide and getting ahead of areas of common conflict will solidify your positive working relationships.