How To Get Prepared To Run A Family Business?

8 May 2017

Many families have a big dream of running their own businesses. Some families are able to gain sizable wealth by running such a business operation. In order to gain above average wealth, the likeliest way is to have a successful business. Many families started their businesses from the ground up, while others acquired small businesses from other. Many families are eager to get involved in business operations, because they see an opportunity to introduce new services and products that are not available in the local market. Some family businesses are not only able to make millions in a year; but can also expand rapidly to make billions. Many self-help and self-improvement books always push us to open our own businesses to gain success that’s only an arm’s reach away. However, we should know one bitter fact that many family and small businesses are not able to survive their third year. When opening a small business, we need to prepare enough cash for initial capital.

In many cases, we also need a sizable cash reserve to allow our business to survive its first year despite poor sales and repeated monthly losses. During the first year, our service and products are relatively unknown and we need to compete with current competitors. It means that business owners don’t take a salary for a year; before the business can become profitable. Some families make mistake by thinking that success is just a few steps away. They recklessly borrow huge amount of cash. Without enough preparation, the family can arrive to a situation where they have no more financial options left. They can’t apply for more loans and their cards have reach the limits. Each month, the interests of their debts continue to pile up, while their businesses still have poor sales and losing money. In fact, their financial conditions were much better when the relied only on a single monthly salary. Instead of bring financial success, family business is their financial downfall.

Before starting a new business, it is important for the family to be aware of the possible risks. There is a good possibility that the business operation will simply fail to bring any financial benefit. Failure in business can bring a feeling of guilt, especially because the financial burden can be felt for many years to come. It is important that the family is fully prepared before they start a new business venture. During the first year, it’s important for them to work hard and not to be discouraged by consistent losses. Without support from the whole family, it will be quite likely that the business will eventually fail. It is important to be prepared of making sacrifices, such as working on the weekends and until late at night. In fact, because they business may lose money initially, it is important for the family to cut expenses. It means that they won’t be able to have vacations, dine out and do other family activities. Despite some of the obstacles, the most important thing is to maintain proper growth to make sure that the business will eventually become profitable.

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