Going into business with your partner

The idea of going into business with one’s spouse can be appealing – after all, who else would you trust more than the person who shares both your bed and your cheque book?

By Philippa Taylor, CEO - Family Business Association

Many are surprised to learn that nearly 80% of all business in Australia is family owned – with an estimated wealth of $3.4 trillion.

This goes to show that working with family can be extremely profitable, but it can also lead to broken dreams and broken marriages.

Family Business Australia is the peak body working with families in business in Australia, and since its inception in 1999, has developed a body of knowledge through its relationships with academics, advisers and family business owners and operators. Members of FBA meet in a confidential environment, and share their experiences – both good and bad, for the benefit of each other. Much of the wisdom presented here has been gleaned from these members.

Those considering going into business with a loved one would be wise to consider the effects of combining that heady mix of love, power and money.

There are a few key points to consider when embarking on a family partnership – for example, it is often easier to enter a business than to leave it and the end should be part of the planning in the beginning.

In other words, accept early on that the business may evolve with time, and go through many stages but inevitably, the founders won’t always be there to run it. So, plan how either one or both will exit, whether this is once the fortune has been made or due to ill health (or even ill feeling).

This isn’t as negative as it sounds, and if borne in mind, putting proper processes into place will make more sense.

Consider that the business may become so successful, that ensuing generations or other family members may wish to join it. Again, proper processes for managing this should be agreed upon sooner, rather than later.

What does this mean? A number of issues should be worked through, preferably with the help of an independent facilitator. Often, the process itself is as important as the outcome. By ensuring that all parties are given a fair hearing, that all their concerns are discussed and addressed, the building blocks for a successful business will begin on a firm foundation.

Having enjoyed a stimulating career in the corporate sector, where retirement was mandatory at age 60, Brian* wanted to put his experience to use in his own business and set about recruiting his wife Sally* to join him.

Working out of his garage initially, Brian began importing nuts and dried fruits in bulk, and after repackaging, selling on to small retailers. Sally helped with packaging, marketing and sales.

After some time, a `friendly neighbour’ did Brian the biggest favour of his life. He was reported to the health authorities, and warned that his business was not complying with the health regulations.

Brian had two choices: Either shut up shop, or move to a factory that enabled him to meet all the necessary compliances. Such was the success of the business, that he took the plunge and the latter path.

Using private equity, the couple rented a small factory, fitted it out, and Sally assumed the role of HR manager as they employed the staff they needed.

Working round the clock, and sacrificing family leisure time, Brian and Sally appreciated the fact that they `were in this together’, but it soon began to take its toll.

Brian admits to making a few cardinal errors along the way. “I realized, with the help of an `external’ facilitator that I assumed Sally knew what my vision was. I didn’t involve her in much of the planning, and even in some of the decision making, I tended to act fairly unilaterally.

“I also didn’t want to worry her, so when I was anxious about making payroll in those early days, I kept it to myself and became increasingly uncommunicative.”

An added strain was the involvement of Brian’s brother. “My brother in law and I had always enjoyed a good relationship,” said Sally, “but I never felt as though he respected my role in the business, and as time went by, I didn’t think he was the right person for the job, and this caused enormous tension between Brian and me.

Despite taking responsibility for all the HR issues, Brian clearly felt family was exempt from the proper processes. He didn’t even advertise the position. When he initially talked about taking Tom* on, I was reluctant to speak up for fear of upsetting everyone.”

When Sally joined Family Business Australia, she was relieved to discover that her situation was not unusual. “It was such a relief to meet with other family business owners who understood what was happening to us, and who were willing to offer support and good advice. Just listening to them made me realize that we were not dysfunctional – just a typical family business!”

Happily, Brian and Sally’s business has grown, and they are in the process of introducing their eldest son to the business, with high hopes that he will take over from Brian in the future.

When embarking on this adventure called `family business’, the following steps need to be considered:

• Position descriptions and clear lines of responsibility
• Hiring, career development and promotion (or otherwise) for family members – if this is agreed at the outset, any personal (and therefore emotional) element is removed.
• Managing and maintaining communications between family members, including mutual respect and shared visions.
• Business continuity, including buy / sell / merge / alliance decisions.
• Maintaining and evolving family business values and goals.
• Managing change including technology, business processes and risk.
• Preparation for retirement and succession, including encouraging, informing and training next generation family members.
• Counseling, training, re-training, positioning and firing family members.
• Responsibilities and privileges, recognition of different needs and circumstances, remuneration, terms and conditions for working family members.
• Responsibilities and privileges, recognition of different needs and distributions to non-working members.

Many families use an independent facilitator to establish, develop and manage these discussions – at least at the outset. Meetings are usually conducted away from the business. Some families have favored the `family retreat’ concept - which combines fun with work, a weekend away with a set agenda.

For more information on Family Business Australia - freecall 1800 249 357