09 Jul GETTING PERSONAL: When is it a good idea to do business with family?
It’s not unusual for owners to partner with family members on an industrial, hotel or office-based business. In fact, many of our commercial real estate borrowers rely on help from parents, cousins, siblings and in-laws. It seems logical to entrust your business to those closest to you, and when it works, it’s an amazing way to build toward a successful future.
But when it doesn’t work, the consequences can be crippling — personally and professionally.
When choosing to work with family, there’s a valuable first lesson that applies to businesses of every type: Great character doesn’t always equal great business savvy. Even if your brother-in-law has bookkeeping experience, he may not be well versed in the intricacies of your specific goals and financials. Similarly, putting your inexperienced daughter in charge of marketing simply because she needs a job will likely hurt your bottom line.
This year alone, we have seen three separate instances where the primary owner lost more than $50,000 because they hired people who weren’t the best fit for the job. Fifty thousand dollars is a lot of money for any company to lose!
What should borrowers know?
If you are going to hire family, make sure they have expertise, or pay to get them trained. Demand excellence and responsiveness. When you launched your business, you accepted a commitment known as a fiduciary duty. It may not trump your duty to family, but it certainly comes close.
The Cornovus Difference
When working through the commercial real estate loan process while employing family members, you need a professional, unbiased set of eyes to help decide what’s working and what’s not. You may not know, for example, that a family member is performing below market standards, that he or she is inadvertently inhibiting your ability to grow, or worse — that they’ve had their hand in the till. Together, we’ll take a close look at your business financials to learn the real story, and we’ll work with you compassionately and confidentially to find the best path forward.