Relatives as business partners-can you trust them?
A True story

 Maya's Business with relatives as business partners

Maya decided to have her relatives as business partners.

 "You believe it is OK to start a business with relatives especially the close ones - whom you have known for decades"?

Maya who trusted the relatives as business partners

I am sharing the story of my mentee, Maya an entrepreneur who trusted her  close relatives and made them business partners.

There may not be any written agreements as getting the business going is the priority.

Will this last forever? What happens if the trust is broken?

Do family members always make good business partners?

Curries and Masalas
 Image:                         artur84                                digitlphotos.net                                                        supertrooper

 Relatives as business partners-Expert View

"Most startups that fail do so in the very first year being born. There are several reasons; the commonest reason is the difference among founders. One, friendship and business partnership are not the same thing. Relationship crack among founders also appear because of unresolved role clarity and ownership pattern.”- Subroto Bagchi

Maya – The Expert Cook

Maya had recipes for curries and masalas from her great grandmother. .Her cooking was awesome..All her friends and relatives loved  the food she prepared. They took some masalas back with them. She even started selling the masalas to her neighbors.

The First Step-Mayas business venture with her relatives

Do family members make good business partners?

Idea and Opportunity

Maya lived close to her maternal aunt’s house. The aunt treated Maya like her own daughter. During a casual conversation Maya’s aunt suggested as her recipes were very popular she could consider setting up a business. The aunt offered her garage free of cost and also agreed to lend the equipment to manufacture the masalas.

Roles of family members

Maya was to procure raw materials from wholesalers as she could get a hefty discount. Further she would market the product.Maya’s aunt agreed to supervise the packing of masalas while Maya’s uncle offered to keep the account books.

Marketing Strategy:

A glorious beginning as Maya was able to tie up with a supermarket chain. The products started moving off supermarket shelves quickly.Maya had to get orders and follow up payments.

Growth

The supermarket chain was expanding rapidly and Maya’s business also grew in tandem. The family’s financial position improved as the profits steadily increased.

The  Jolt

Can life be hunky dory always? There has to be a jolt from an unexpected development.

image:isophere

Maya’s aunt fell sick and did not recover. Her sudden demise brought strain in her relationship with her uncle. The uncle wanted Maya to leave. He wanted to run the business with employees.Mayas effort to convince him failed.

Clouds over the horizon– Zero Sum Game 

The uncle’s optimism to run the business was misplaced.

 Ø  The quality of masalas could not be maintained as  secret of Maya’s  recipe was missing

Ø  The cost of raw materials went up  by 30-40%as the employees bought from retail market

.Ø  . Maya was the pivot with the supermarkets and the employees could not fill up that role and the sales dropped.

Maya wanted to branch off on her own.

 ØShe approached banks for loans but was turned down as she did not have any assets as collateral

Ø  She did not have sufficient space to manufacture large quantities of masalas.

Silver Lining 

Maya requested me to speak to her uncle. I met her uncle and was able to convince him. Time is a great healer.. Past acrimony was forgotten in forging new ties.  Both realized it was in their interest to work together. A formal agreement was signed which included sharing of the profits.Maya realized that it was not easy to win back the trust of the buyers at the supermarket. It took her close to six months to recover and reach the earlier volumes.

There is always another side to the coin

Stay tuned for the next blog