How to Start a Business With Your Family

In Mexico there are 5 million companies, 90% of them are family-owned. However, only 13% reach the third generation. Those that remain successful have Corporate Governance.
How to Start a Business With Your Family
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This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.
Opinions expressed by Entrepreneur contributors are their own.

If you are thinking of starting a business with your brother / sister, cousin or nephew, the most important thing to do is establish clear rules. You have to differentiate between what the company is and what the family is . In many moments that part will be difficult, changing your cap, but it is the best.

The general manager must be objective enough to identify what each of the family members will contribute. Some will provide only their love and solidarity. Welcome. Others will provide their time, commitment, and even money. Also welcome. What you have to learn is "don't ask the elm for pears." Remember that no one can give what they do not have.

If your sister loves you a lot, let her "cheer you up." Or if you have a cousin who likes to work, invite him. Do not try to get someone to participate with you if they are not interested and do not ask for money from those who do not want to contribute. You have to be very objective. The family will be your best ally if you know how to take advantage of what it offers you.

According to statistics in different parts of the world, family companies tend to have better economic and financial returns than corporate companies because of the love, commitment and synergy that is created between members of the same family.

In all this issue of family businesses, a pioneer institution is Banamex. He has organized numerous seminars, courses, conferences and research. He recently announced the Citibanamex Center for the Development of the Family Business and the results of the Corporate Governance study for the continuity of the Family Business .

In Mexico there are 5 million companies, 90% of them are family-owned. 33% reach the second generation and only 13% survive the third. 90% of family businesses do not have a retirement plan for the current founder or leader.

“The problems faced by family businesses include the lack of a good and effective Corporate Governance structure, as well as a deficient institutionalization. Although the most serious problem is that the employers do not plan the succession. This is the strongest challenge for family businesses in Mexico and in the world, ”says Carlos Núñez, executive director of the Citibanamex Center for Family Business Development; offering research, training, a national and international network of contacts, conferences, forums, seminars, events and best practices worldwide.

These are the first two steps for family businesses to be 100% professional:

Create the Family Council

It is the first guideline for family members who work in the company or are partners to begin to communicate and establish the rules (protocol). One of the greatest benefits that organizations obtain with the Family Council is the improvement of communication and the strengthening of trust. Along the way, the Board of Directors is being formed

Install a Board of Directors

Many do not because they believe that their freedom to make decisions will be limited. On the contrary, consulting experts creates another vision, a panorama that you do not have, in addition, it is decided with greater wisdom. This Council deals with strategic issues, not operational ones. The benefits? Increase in profits, give the company formality, transparency and accountability, protection of shareholders' interests, etc.

7 steps to avoid the death of these businesses

Among the most common causes for the disappearance of family businesses are the lack of clarity about the role of the family, the overlapping of functions and the lack of a professionally acting board of directors.

To avoid these situations, it is necessary to develop a structure that puts order in the company. This should be aimed at preserving the balance between the development of the business and that of the family, in addition to framing family relationships in an orderly management.

A model that meets this objective should enhance the qualities of a family and take care of others that are necessary in any company. Here are the seven keys that you should protect:

1. Shared values. If as a family you have a shared vision about the future of the company then you will continue together and with greater success. So one of the vital tasks for every family business is to develop a shared vision to focus on the future.

2. Power sharing. This means respecting each other's talents and abilities between generations, spouses, and siblings.

3. Take care of mutual respect. If you don't have mutual respect, you can't be in the same business. Respect is built on the trust that comes from knowing that you can depend on other family members, and that they can depend on you.

4. Respect privacy. Families that do business together stand out for their unity. But respect for the privacy of the other as an individual, as well as the privacy of each family unit within the extended family, is essential.

5. Well defined borders. The most common problem in business families occurs when there is a conflict between two family members. Avoid this type of situation, defining well the functions, duties and rights of all.

6. Create an assembly. In more complex family businesses, due to the number of family members involved, it is advisable to create a family assembly. In cases where the number of family members who do not participate in the business is greater, the council functions as an internal commission and operates as a representative of the assembly.

7. Formalize your directory. This will be in charge of defining the future, the vision and the strategy.

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