SCORE: How to manage a family business

A popular American tradition is the family business. It gives spouses, parents, children and others a chance to share a dream that can continue to grow and prosper generation after generation.

But without proper planning and management, family businesses can also be the source of contention and acrimony to once-loving relationships. That’s why it’s important for aspiring entrepreneurs to fully understand the pros and cons of going into business with family members and in-laws.

The needs of the business may not always be compatible with family harmony, resulting in a situation that, handled improperly, can jeopardize the survival of both.

When bringing family members into a business for the first time, whether directly or as investors in a startup situation, you should make sure the business relationship is put into writing in a clear document signed by all participants. Family members sometimes buy into the excitement of a business startup without a clear idea of their role, if any, in the operation once the business is under way.

In an ongoing family business, it’s important to treat family members fairly, as with any investor or employee. While some experts advise against hiring family members, that sacrifices one of the great benefits of a family business. Countless small companies would never have survived without dedicated family members.

But there is no room for favoritism. Pay scales, promotions, work schedules, criticism and praise should be evenhanded between family and non-family employees. Failure to follow this rule can lead to very messy legal hassles.

Don’t fall into the trap of becoming the employer of last resort for everyone in the family who calls. Employment must be based on the skills or knowledge someone can bring to the business. If your children will be joining the business, it is best to make them get some solid business experience elsewhere first to help them gain perspective of how the business world works outside of a family setting.

Problems and differences of opinion are common in a family business, so it’s important to keep lines of communication clear. Weekly meetings to assess progress, air differences and resolve disputes work well for many family firms.

Hiro Hiranandani of Wilton is a counselor in the Fairfield County Chapter of SCORE. Information: and 203-831-0065.