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Doing Business with Friends and Family

February 28th, 2008 · Posted by Hugo · 3 Comments

There’s a traditional piece of advice: don’t do business with friends and family.

Why is that? Might that not be an indication that there’s something wrong with the way we do business or build relationships? Could it be because our approach to business is too cut-throat and ugly? Should we not aim to improve our business practises or ethics to the point that this is no longer a problem? Or alternatively, might the problem be that our relationships with friends or family aren’t honest or direct enough, or too fragile, a house of cards that collapses under too much pressure?

People of the Jewish culture supposedly don’t have this problem. (Stereotypes… hmmm.) What do they do differently?

Categories: Culture
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3 responses so far ↓

  • 1 Negate // Feb 28, 2008 at 10:56 pm

    I’m a business student, it has nothing to do with relationships or honesty Hugo. There tends to be a lack in balance between family matters and the business needs. Most people tend to put family matters into doing business and that is not a good way to do business. Customers need to come first. There are allot of tools to help one keep balance like advisory boards or a Family council. These tools help to keep family matters and business matters separate but still enforces family and business needs as a philosophy. If there is not harmony between family needs and business needs it effects growth and survival of the business. You can not just change business ethics. businesses are constantly under attack because of a changing environment to improve and put customer and environmental needs first. If you understand the business environment you’ll understand why businesses and family matters need to be kept separate. It is when these matters collide that you become a majority statistic of family business failures. Family businesses fail like majority other business because of a lack of understanding and a lack of the needed skills to survive in this environment. Even if you improve communication between family members that would not improve there understanding of the business environment and will still lead to failure.

  • 2 Negate // Feb 28, 2008 at 11:03 pm

    Hugo in America 90% of businesses fail. In SA its 80 percent. Regardless if you run a family or private business there is a great change of failure. Under a family business there are more drama which then just increases changes of failure. In SA only 30% of family businesses survive the first year, in the second year only 10%

    So statistically speaking a family business does better in the first year than other businesses. Then it starts to crumble, mostly because of status en succession issues among family members. Business ethics are perfectly fine, it is family issues and ethics that needs to be looked at.

  • 3 Hugo // Feb 29, 2008 at 12:44 am

    Thanks Negate. So what do you think family-relationships need? I suppose the emotional aspect is the problem. Hard to overcome that…

    All family members would need to understand how business works, and understand the separation? (Business and family separation, state and church separation…)

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