In many small businesses, it is very common to hire family members and/or friends.  But it’s not always the best option.

The choice depends on various factors, but there’s always going to be advantages and disadvantages.  Important factors include having the right personalities, open communication,  and an ideal organizational structure designed since the very beginning to make things work smoothly.

In my life as an entrepreneur, I have been fortunate to have started and operated five different businesses.  Of these five, I lost money on two, I broke even on one, and the last two I have been able to make profit. In all of these businesses, I’ve always had family members and friends either as partners or employees and it hasn’t been easy.

At times, this can be counterproductive.  However, I’ve had good experiences and it’s worked for me. Partly because I’ve always made the effort to communicate the structure of the business and what I expect from them.

When I was in college, I remember attending a very important business conference where they talked about family businesses.  The presenter was the President and CEO of a very important candy company in Mexico and he alluded to the fact that running a business with your family was not easy.  It was even harder for him because his siblings were also part owners of the company and were working there full time. However, he mentioned that with open communication and establishing clear rules since the very beginning should help the odds of succeeding.

It is very important to talk about these things before you start a business or project. Before you establish a partnership or hire a family member or a friend, you should always talk about the roles, responsibilities and expectations of each person.  Moreover, you should always determine who the leader will be within the company and the person who will make the final decisions.  A lot of times this is one of the hardest things to do in a family business, especially if there’s not a natural leader like the patriarch or matriarch of a family.

It is very common to choose a family member or a friend to run a specific department like marketing, sales, production, accounting, etc.  However, it is important to mention that if this organizational structure is chosen, the leader should always have the final word; and that’s how it should be.  However, a good leader should delegate and not question every single decision made by the managers and should trust that they make the right decision.  But now and then it happens where the owner has “veto” power.

The problems come when you mix personal and business relationships.  If you have a family member or a friend helping you out in sales, and the numbers are not there, it is always hard to tell that person that they are not doing a good job.  The ideal situation would be for the employee not to take things personally and to make the changes necessary to make things work, but unfortunately it doesn’t always happen like this.

In any business setting, the vast majority of managers, supervisors or even the owners of the company do not think about hurting feelings if they have to talk to an employee about something.  Usually they talk about facts, what’s happening and the objectives and mission of the company.  When talking to an employee, because it’s a work related and there’s levels of authority the communication is clear and it has to be respected.

Like everything else, there’s always exceptions, but if an employee is doing something wrong you talk to them; that’s it.  If they do not improve, then you fire them.  But with a family member or a friend, it’s not that easy.  That’s why is very important to communicate rules and even better to put them in writing before starting a relationship.

If everything works well, one of the advantages of having family members and friends working by your side is that they will take care of you business like nobody else.  And, nobody will offer you better loyalty than them.  In my experience as a business owner, there’s always going to be theft and what better way to control that than to have people that you trust.

Although there’s always going to be exceptions where some people close to you will steal from you, try and be prepared.  This can be a very hard situation but you have to think with you head and fire that person. You have to accept the fact that this will potentially hurt your relationship with that person for life.  Overall, managing a family business is not easy, but knowing how to structure them can be a clear advantage to the success of your business.