The Pros And Cons Of Hiring A Friend Or Relative At Your Startup Entering into an employer-employee relationship with friends and relatives requires considerably more thought.

By Anisha Sagar

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Many lifelong friendships begin in the workplace, but can it work the other way around? Can aspiring entrepreneurs rely on their nearest and dearest to help them do what it takes to succeed? Apparently, 80% of startup founders recruit family and friends. While the idea of doing this might sound great in principle, what exactly does it take to make this kind of arrangement a workable reality? What are the major pros and cons of hiring a loved one? Some major considerations are needed, relating to:

● Trust
● Affordability
● Commitment
● Communication

Let's take a closer look.

For many entrepreneurs, a startup business is their baby. This makes it incredibly difficult to hand over responsibility to anyone. Trust is a crucial factor, which is why it makes perfect sense to give those you already trust implicitly a central role in your business efforts. After all, if things work out, you'll be able to celebrate your mutual success and progress to bigger and better things with them at your side.

However, trust is a two-way street. And while you can trust someone to be honest and open with you, you might not always like what they have to say. You also need to be able to trust someone's ability to do the job you've created for them. Sometimes our capacity to trust can cloud our judgement. For example, your partner might be great at handling your family finances, but that doesn't necessarily make them the best fit for that critical CFO role you want to fill. If you do choose to hire someone you trust, it's vital to make sure that the skills they offer match your business' needs.

Related: Four Ways To Make Friends At The Office

Some of the world's most successful company founders started their businesses by borrowing money from family and friends (Jeff Bezos' parents' Amazon shares are rumoured to be now worth billions). But employing them? That's quite another matter.

As a company founder, you'll be watching every penny you have. By hiring a close friend or family member, the obvious benefit is the fact you'll instantly save money on advertising and recruitment fees. You also might be able to pay them less. Or (if that doesn't sway them) even offer them equity in exchange for their efforts. When Facebook founder Mark Zuckerberg needed someone to help him communicate his vision, he turned to his marketing expert sister, Randi. She willingly took a pay cut to help out her younger brother. It seems that moved paid off for all concerned.

Possible downsides, however, could be that other staff could start to ask questions about your friend or family member's pay or stake in the business. Anything that smells of nepotism can cause resentment. Equally, if there's a big pay gap between staff and your family member/friend –and this isn't evident from the outset– there could be some degree of animosity. This could then spill over into other aspects of your life.

To get your business off the ground, you'll want to surround yourself with dependable, hardworking people– the kind that'll go above and beyond the call of duty. What you need is someone as committed to your vision as you are. Someone engaged and able to deliver. After all, the more engaged employees are, the more productive they'll be. They're also more likely to put in extra hours and help with additional work– off the clock.

However, there's a difference between asking someone to take on occasional extra hours and relying on them to stay late at the office several evenings a week– even if they are related to you. It's crucial to respect that they may have other commitments outside of work and to give them the time and space they need to fulfil those– just as you would with any other employee. Of course, having a friend or relative working for you might mean you feel comfortable asking more favours of them –but there's always a limit to someone's generosity– especially when it comes to their own precious time: no matter how close you are.

Related: Five (Valid) Reasons To Decline Your Boss' Facebook Friend Request

One of the main reasons for employing friends or relatives is that they "get' you. Great communication has already been established which in business accounts for a great deal: trust, output, and morale.

However, some of the other aspects of business can be a stumbling block: hierarchy for instance. This can be a problem when working with those you know well as it instantly puts a communication barrier in place: between "you' as the boss and "them' the employee. But for many people this is less of an issue, particularly in startup environments which by their very nature tend to be less formal, and much smaller in size than established businesses.

That said, by giving everyone in your business an opportunity to regularly voice concerns, and by establishing clear lines of communication between management and employees, barriers are more easily eroded. This means a more egalitarian mood prevails – based on mutual respect for each other's status and abilities.

Some final thoughts
Ultimately, running a startup usually requires a set of specialist skills –often technology- or business-orientated. If your friends and relatives are experienced in certain areas and are willing to share the benefit of their expertise with you on the odd occasion, then that's great. But entering into an employer-employee relationship is a different matter entirely and requires considerably more thought.

Here are a few final things to consider before employing a close friend or relative:

● Make sure they have the skillset your business needs
● Treat them with the respect you give other employees
● Show appreciation for their efforts
● Know when to draw the line between your personal and professional lives

● Abuse their trust and good nature
● Overburden them with responsibility
● Expect them to work for free
● Pull rank when they disagree with you

Related: Friends With(out) Benefits: Mixing Business With Pleasure

Anisha Sagar

General Manager, Business Incorporation Zone (BIZ)

Anisha Sagar is General Manager of Revenue & Marketing at BIZ where she leads a 40-strong team of company formation professionals. She is responsible for stakeholder relationships in the region, business strategy and growth, managing profitability and increasing brand recognition. With over 15 years of experience leading successful sales and marketing teams, Anisha started her marketing career as an Account Director at International Marketing Communications (IMC), later becoming the Assistant Vice President of Sales & Marketing. Anisha holds an MBA from Australia as well as Negotiation and Influence training from MIT Sloan.

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