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Don Van Der Zwaag, Nicholas Reister and Rich Chrisman Don Van Der Zwaag, Nicholas Reister and Rich Chrisman Courtesy Photos

3 experts weigh in on what to consider before you go into business with family

BY Sunday, August 07, 2016 01:22pm

While it’s common for entrepreneurs to turn to family members for business partners, it’s a practice that can come with its fair share of baggage.

That’s according to advisers to family businesses who say running a company has its own unique challenges that require careful navigation of family dynamics and personalities, not to mention a balancing of business and family interests. Constant communication is essential, and experts recommend people always put family first.

MiBiz asked a few experts for advice on the subject. They were:

  • Don van der Zwaag, vice president, M&A adviser, business exit planner and transition coach at The Vantage Group Inc. in Grand Rapids
  • Nicholas Reister, an attorney who leads the trust and estate practice with Smith Haughey Rice & Roegge PC in Grand Rapids and works primarily in family business planning
  • Rich Chrisman, a CPA and managing shareholder at Hungerford Nichols CPAs + Advisors.

Here’s what they had to say. 

What’s the single biggest consideration for going into business or running a business with a family member?

van der Zwaag: The bottom line is be sure, before starting the business, that you’ve thought through how you’re going to leave the business. Begin with the end in mind. It’s always good to think through, ‘If I need to leave or if I feel differently about this business in two years, what are you going to do — buy me out? Or am I going to buy you out?’ Let’s decide those things in advance.

It’s a rare thing that family members, when they go into business together, maintain a harmonious relationship and a close personal relationship after any number of years. It happens, but it’s very rare. Typically, it’s more of a propensity to destroy family relationships rather than build family relationships.

I always say that if you can’t figure it out yourself, get somebody that both parties trust and hopefully someone that’s been successful in their own business life to talk to you about the implications before making those kinds of moves.

Reister: When you’re dealing with family, there’s not good, solid data to analyze because you’re dealing with emotion and it’s a little squishy. I think you need to analyze whether your family relationships are healthy enough so that they would be healthy while in business together and in the event the business relationship ends.

Chrisman: They need some kind of a decision-making process. I have seen issues when you have two brothers and they’re 50-50. In some families, that can be a big problem. In others, I’ve seen that’s not an issue at all, where you have a brother and a sister and they are 50-50 and they’re totally fine with that and they make decisions together.

What must you do every day to make a business partnership with family successful?

van der Zwaag: Communicate, communicate, communicate. It’s all about not assuming and being very clear and coming to agreement regarding your priorities and the way you decide things and the way you’re going to move forward.

Reister: It goes back to communication. A breakdown always seems to come down to communication and not being able to either come to an agreement, or come to an agreement on disagreements.

Chrisman: It’s certainly a lot of communication and that’s really the key. Have family meetings where you can get together and just talk about what’s going on, what challenges you’re facing and what you can do to help each other.

You have some families that have a little dysfunction in them and that can just carry over into the business setting.

And make sure that you surround yourself with good professionals that you can go to with issues. A lot of family-owned businesses, depending on the size, they may not have a lot of people internally they can go to for advice, so it’s important that these families surround themselves with good professionals and know when to use them and get their advice.

What should you absolutely not do when dealing with a family-owned business?

van der Zwaag: Keep secrets. I can’t think of any partnership that will succeed with secrets. It’s so elementary but it happens all too often (where) smart people just feel their partner doesn’t need to know that. You can’t tell everything, but you have to be sure you tell the important things to make sure you are on the same page.

Reister: It’s easy for me to say, but not easy to do: Always let business disagreements stay at the business. Don’t let it affect the family relationship. Leave it at the door and always remember that family is family.

Chrisman: One big challenge they have is the (family members) that are not in the business, I think the family needs to be sensitive to them. You don’t want to do things that create situations that can break up your kids so they’re not speaking and that kind of stuff. You have to be sensitive to those types of situations. You hate to see a brother and sister not speaking to one another (over) what dad did with the business.

What comes first: business or family?

van der Zwaag: There’s no purpose for being in business unless you have a solid family. To me, it’s all about God and family, and business is a tool to use to help you build a life and help others.

Reister: Family, every time. Business opportunities will always be out there, but you have a limited amount of family.

Chrisman: Family always has to come first. I think for some of these businesses that’s not the case. I know a situation where a son and a dad ended up in a big argument over it. One advice my dad always told me is, ‘Don’t ever argue with your family over money.’ Sometimes you come out on the short end and that’s just the way it is. Don’t let that ruin your relationship with your family. I’ve always tried to pass that along to people when appropriate because sometimes people get so stirred up over things that really aren’t that significant. In the overall scheme of things, they’re pretty minor and why blow up the family over something that has to do with money when they’re all doing fine? 

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