Would you feel more satisfied with your life if you had a devoted family and great friends but had little to show in the wealth column, or if your net worth made you extremely wealthy but you were estranged from your closest relatives and colleagues or lacked genuine companionship?

For many people, the love of family cannot be equalled by any amount of riches, and as the saying goes, “Good friends are better than pocket money.” Whereas your wealth can be eroded, caring family members and true friends will remain loyal to you through both prosperity and lean times.

While having a good relationship with family and friends is priceless, don’t assume that the rapport that you share with your closest companions will also carry over into the business world. On the contrary, operating an enterprise with your loved ones can sometimes be fraught with major challenges.

Can your relationship stand the test of business?

It’s not unusual to hear stories of formerly loving family members being torn apart after they went into business together, or of friends who no longer speak to each other after an unsuccessful attempt at a joint venture. How could owning a business with your loved ones possibly create this personal stress?

The reality is that running a business requires fortitude and professionalism, and the tough demands may conflict with the affectionate feelings that you share with your family and friends. Let’s look at some strategies that can help you to manage the process of doing business with people you love.

Assess your compatibility

Before you get started on actualising a business idea with a loved one, you need to be honest about the traits and capabilities of all parties involved. Think about hinder the business, and consider how these could lead to potential problems in the future.

For example, if one party procrastinates all the time, it could affect your ability to follow through on jobs, and it may be unwise to give the business cheque book to a partner who is careless with money. Try to avoid having business relationships with people who don’t measure up to your work standards.

Establish specific roles

You need to be very professional about what each party is expected to do in operating the business. Don’t make assumptions about your roles and responsibilities; it is recommended that you put your expected work functions in writing so that there will be no misunderstandings in the future.

Although you will all bring valuable skills to the business, there should be only one person ultimately in charge. It can be very difficult for employees if different partners make conflicting requests, so you need to determine an organisational chart that clarifies each person’s level of authority.

Discuss profit-sharing

One objective of going into business with your loved ones is that you can collaborate to create wealth, so it’s important to make a plan for how the business income should be shared. You should also determine if the owners should take a monthly salary or wait until the business shows profit.

There can be resentment if one party does more of the work yet receives the same amount of income as the other parties, so be certain that each role is adequately remunerated. Also, ensure that you agree on how much money should be retained to grow the business for the future.

Use independent advisors

Although you may think that family and friends should trust each other, when you’re in business it’s best to let an accountant maintain the books and ensure that the financial transactions are above-board. In addition, hire an attorney to create fair and legal agreements for all parties. If there are disagreements about how the business should be managed, it would be useful to engage a business advisor who can help you to determine your best strategies. If money is tight, then get an experienced friend who can objectively guide all the parties into making the right decisions.

Create an exit plan

While you hope that your business efforts will be successful, there may come a time when you need to terminate your working relationship with your loved ones. Ensure that there is an established process before you even get started that will dictate how the assets and liabilities should be shared. If there are outstanding obligations to be met, it may be a complicated process to close the business and pay out each party. Get the help of an accountant to determine how best to liquidate the entity and ensure that each party is fairly recompensed. Even if running a business with your family and friends does not work out, remember that you shared close bonds with your loved ones prior to the venture. Refocus your relationship away from work issues and try to restore the fun and camaraderie that you enjoyed before.

Cherryl is a money coach, business mentor and founder of Financially S.M.A.R.T. Services. Her upcoming book, “The 3 Ms of Money” will reveal all the secrets she learned about financial success. Read more on money and business matters at financiallysmartadvice.com and entrepreneursinjamaica.com. Email comments to cherryl@financiallysmartonline.com.