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Money Management Advice When Working with Family

 

Solid money management advice for your family-owned business is more intrinsic to the success of the business than for other businesses. One possible reason you chose a family-owned business (around 80% of all North American businesses are family-owned) is to sustain future generations of your family financially, as well as to keep the family close. In order to properly manage money when working with family, clearly define your business practices from the outset. 

Develop A Business Plan

While a business plan is intrinsic to the success of any business venture, it is critical when working with family. The reason is that a business plan will keep everyone focused on the goal of the business, clearly defining the overall vision and mission of the business. It is much easier to manage money when goals are clearly defined and everyone agrees on the goals. 

Define Job Descriptions

Each family member has a role to play as an employee of your business. Jobs should be given to the person with adequate skills, knowledge, and if applicable, experience. Also, jobs should be clearly defined as to specific duties and performance expectations, and the compensation should reflect the type of job performed. For example, the secretary position should earn a secretarial wage. Paying too much for a position takes money from other business aspects such as marketing and dilutes the potential for success.

Competitive Pay

One tendency within a family business is for family members to believe that they are entitled to the money the business generates. As with designing job descriptions, paying family members competitive, living wages with reasonable raises based on guidelines (as with a regular job) is a very important part of managing the business's money. 

Employ a Non-Family Advisor

It may prevent many problems to hire someone outside of the family to help make business decisions. This advisor acts as an impartial third party whose implements money management advice and keeps the business financially sound. 

Guidelines For Loaning Money

There has to be some benefit to being a part of a family business such as borrowing money from time to time. When working with family, it is especially important to keep all business matters very formal. All money transactions between family members and any loans taken out from the business itself should be accompanied by a formal contract and repayment schedule. 

When working with family, it is especially important to follow good money management advice. Develop a business plan that everyone agrees on and employ family members with the necessary abilities and experience to fill each position. In addition, hire someone outside of the family to act as an impartial money management advisor for the business. There are many advantages to owning a family business. Don't shy away from making healthy business loans to family members, just be as formal as a bank would be about the terms of the loan.

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