All in the family: do you want to mix business with family or friends? To preserve the ties that bind, be sure to prepare with care

Entrepreneur, April, 2002 by Nichole L. Torres

YOU'VE BEEN TALKING ABOUT STARTING that flower shop with your best friend for years. Or perhaps you and your brother are finally ready to open that restaurant you dreamed of endlessly when you were still sharing a room at home.

Now that you're in the start-up phase, the real issues of running a business with a close friend or family member are upon you. How will you stay friends? How will you separate your work life from your home life? How do you avoid a bleak failure that will haunt your Thanksgiving dinner table for years to come?

Family business experts echo one definitive piece of advice for startups: Communicate. Get everything out upfront, draft contracts and have discussions where you dissect every possible business scenario. "This should all be done in a very nonjudgmental environment," says Jim Ellis, director of the Family Business Program at the University of Southern California. "[You] need to discuss those issues upfront, when nobody's got an ax to grind and there's no emotional situation--because there will be emotions later on, without question."

Putting away all fairy-tale notions about the "perfect" family or friend business is step two. Ellis recalls a nightmare consulting case when an entrepreneur had to fire his mother, causing years of strife. Even now, says Ellis, though the business no longer exists, there is still much animosity in that family.

Although there's no foolproof way to avoid such an ugly experience, experts suggest a few tips for increasing your odds of success. Says Ira Bryck, director of the University of Massachusetts Family Business Center in Amherst, Massachusetts, "People [involved in family businesses] need to do what they're especially good at. They need to know what their job is and what their job isn't." By defining everyone's job titles, compensation and responsibilities upfront, you can prevent any kind of future drama.

In the end, warns Ellis, you may have to choose between friends or family and your business. When long-time high school buddies Adele Testani and Ken Deckinger founded Hurry Brands LLC in New York City, they went into it knowing that their friendship would always take top priority over everything else. Says Testani, 26, "If anything ever happened with the company, we'd want to save the friendship."

If you plan carefully enough, a family or friend business can be rewarding as well as profitable. Says Deckinger, 28, who expects HurryDate, the company's signature dating service, to gross upward of $500,000 this year (2002), "It's fantastic to do this--to pursue a dream with someone you are really close with."

I Will Survive

VALUABLE TIPS ON PREPARING FOR THE WORST-CASE SCENARIO BEFORE DISASTER STRIKES YOUR BUSINESS.

EARTHQUAKES, FIRES, FLOODS -- DISASTERS happen all the time. Whether man-made or from Mother Nature, unexpected catastrophes are less likely to defeat businesses that have effective disaster-preparedness plans in their back pockets.

While it may seem too early to worry about the worst, protecting your business as soon as you launch it is actually the wisest course of action. An entrepreneur's first step, according to experts, is to ask yourself what you would do if you couldn't occupy your offices. How would you contact employees? How would you reach your clients? What kind of insurance coverage will you need to ensure you can do all these things?

Business-interruption insurance and records reconstruction are good policies to look into, according to experts. Says Gary W. Eberhart, executive vice president of the National Association of Professional Insurance Agents in Alexandria, Virginia, "[Insurance agents] can be your partners -- they can help you come up with a plan."

And although disaster insurance coverage can be costly, especially after 9/11, a few efficient, less expensive ways can protect your business, too. Back up all your crucial data and keep those files off-site in a safe place. But be sure to check on them, experts say.

"Periodically retrieve those backups and make sure they are complete," recommends Larry Baye, director of Business Continuity Services at Grant Thornton LLP in New York City.

You should also make copies of important paperwork such as customer contracts, employee information and legal documents, and keep those off-site as well.

Finally, you should do your homework and make sure that each of your outside vendors also has a disaster plan lined up.

According to Baye, "A lot of start-ups are dependent on outside parties, and they really haven't done much due diligence -- they never really inquire whether or not the third party has any [disaster] coverage in place."

Disasters can be nightmares, but, with the right contingency plan, your business can and will survive even the worst of circumstances.

FOR MORE INFO

* Insurance Information Institute

(www.iii.org)

* Disaster Recovery Journal

(www.drj.com)

* International Disaster Recovery Association

(www.idra.com)