Running a Business with Family: Fun or Feuds?

SPRINGFIELD, Mass., Feb. 4 /PRNewswire/ -- Getting into business with family sure sounds appealing – until family fun morphs into family feuds.

(Photo: http://www.newscom.com/cgi-bin/prnh/20100204/NE50058 )

Family members who operate businesses together often cite problems reaching agreement, setting goals, and compromising, according to a 2009 study, FamilyPreneurship: What Every Entrepreneur Should Know before Starting a Business with a Family Member, by Massachusetts Mutual Life Insurance Co. (MassMutual). Additionally, family members cite trust with partners as their top concern more frequently than do spouses who run businesses together.

"It's clear that if you don't address important issues like the decision-making process and who's in charge of what, you're likely to run into lots of trouble that can hurt the business and damage family relationships, to boot," said Beth Wood, assistant vice president of Business Market Development, MassMutual, and a former family business owner herself.

Moreover, if you're a parent who's thinking about leaving your business to your children or other relatives, be aware that these dynamics can derail a successful transition, added Wood. "You can't leave it to chance that the family members you pick to be your successors are going to see eye-to-eye all the time, and unless you and they put good plans into place, your succession and retirement can be jeopardized."

The 2009 survey, commissioned by MassMutual and conducted by Harris Interactive, found that family members who are in business with one another are significantly more likely to cite issues such as disagreements and lack of coordination as disadvantages. By contrast, spouses who are in business with each other rated those issues as less of a problem. The two-part study was conducted among six focus groups of small business partners and online among 518 business owners.

Furthermore, family business owners feel trust among partners is one of the most important factors contributing to the success of a business. By contrast, spouses who are in business with each other are significantly more likely to feel that being passionate about the business is more important to success. The difference suggests that siblings and other family members are concerned about trust issues with their partners.

While running a family business can be challenging, respondents to the survey said that advantages clearly outweigh disadvantages. Among the secrets to success are the need to:

• Communicate well, both as partners and family members;
• Have a clear and efficient decision-making process. Respondents who said their businesses suffered from ineffective decision-making said the top reasons were stalemates between partners, overly emotional debates, and a lack of decision-making speed.
• Have clear roles and responsibilities. As one sister in a restaurant business said, "It's important so you don't butt heads… One of you has to make a decision and you have to stand by it." By contrast, one co-owner of a business with three equal partners complained of the paralysis that hampers his business. "It really goes back to my father-in-law, who really should have put (one person) in charge when he retired, or before he died… Three people can't be in charge."

The findings have significant implications for family-run businesses, according to Wood. "If you're starting or running a business with family members, you should address important issues like decision-making protocols and areas of responsibility so that disagreements don't fester. And if you're already in a smooth-running business with family members, don't take it for granted that it will stay that way. You should address these issues so that problems don't crop up over time."

Learn how MassMutual helps entrepreneurs meet their business needs; visit massmutual.com/smallbusiness. Find a financial professional or Certified Family Business Specialist* (CFBS) to help with your business insurance needs; visit massmutual.com/home/locateoffice. Search for an office in your area, and ask for a business specialist to contact you.

Methodology

FamilyPreneurship is a two-part study of focus groups among small business partners, and an online survey.  Six focus groups were conducted by Harris Interactive on January 29, 2009 among 6 separate pairs of family business owners. Participants met the following criteria: all own a business with a spouse, sibling, or immediate family member, have between 1 and 500 employees, have been in business for at least five years, and earn a total annual revenue of $1 million or more.  The survey was conducted online within the United States by Harris Interactive on behalf of Massachusetts Mutual Life Insurance Company between March 6 - 20, 2009 among 518 business owners, among which 330 are involved in a spousal business relationship and 250 are involved in a business relationship with a family member other than a spouse. Respondents met the following criteria: all U.S. residents, age 18 or older, have between 1 and 500 employees, have owned their business for at least five years, and have annual revenue of $500,000 or more. Results were not weighted. No estimates of theoretical sampling error can be calculated; a full methodology is available.

*The Certified Family Business Specialist program is offered by the American College in Bryn Mawr, Pa., exclusively for MassMutual financial professionals.

About MassMutual

Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company's strong and growing network of financial professionals helps clients make good financial decisions for the long-term.

MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, Inc., member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.

About Harris Interactive

Harris Interactive is one of the world's leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through our North American, European, and Asian offices and a network of independent market research firms, Harris specializes in delivering research solutions that help us -- and our clients -- stay ahead of what's next. For more information, please visit www.harrisinteractive.com.

SOURCE MassMutual