Blood in Business

When siblings set up business, how does one ensure smooth financial transactions without any clash? Anil Rego, Founder and CEO, Right Horizons, shares his perspective.

Priya and Pooja Nagarkar were sisters who had started a printing venture together. Initially, both sisters were very enthusiastic about the venture and left no stone unturned to ensure that it became a success. However, after Priya got married, she needed to cater to her familial requirements too, which left her with almost no time to look into the affairs of the business. Pooja, on the other hand, found herself working for two people, running the show single-handedly. Slowly, the unfair share of workload she had to take on began irking her. Feeling justified, she even began pinching a bigger percentage of the profits. Priya soon got wind of it and confronted her sister. What began as an argument soon took a dirty legal turn that ended up at the police station.
Starting a business with a sibling is a trend that is catching on, especially with women entrepreneurs who set up shops or businesses with their siblings.
In most cases, it can prove to be a very wise move, for apart from their individual experiences, the siblings benefit from a trusted pair of hands running the show. Nevertheless, like most issues revolving around relations, while it is a good idea for siblings to work together, it would be wise to carefully discuss the grey areas beforehand to avoid issues in the future.

Plan inputs

The most important point in a joint business would be about the division of work. In other words, make a clear classification of the efforts and money involved in the business. It might help you determine how much of the business each of you own. If one of you only offers advice, while the other takes care of day-to-day operations, the sibling who is doing all the work might end up becoming resentful of the one who is not actively involved.
The situation could even get worse if the business becomes successful.
And while at it, clearly chart out each of your roles and responsibilities. For example, if your sibling and you are setting up a home-bake business, figure out who would handle the baking and day-to-day productions and who, the marketing and other operation-related activities. Plan your roles accordingly and ensure that there is transparency on everything, especially the time each of you can spend, each day, on the business.

Plan the financials

The next step—which is one of the most crucial steps—is to plan the finances. Take stock of who puts how much money into the business. Also, once the business starts generating income, decide in advance how much salary each of you will get. To avoid possible conflicts later, have this drafted into
a written agreement.
You should also plan on who is going to be responsible for the day-to-day finances of the company. Also decide in advance if there need to be joint signatures on cheques or if only one of you needs to sign the cheques. Although it may seem silly to think about all this when setting up businesses with a sibling, it is important to keep in mind that relationships can sour very fast when money is at stake.

Plan the work flow

If one of you is designated to be in charge of the finances, then even if you are given a free hand by your sibling, it is important to regularly discuss issues like financial inflows and outflows as well as plans with each other. The transparency will ensure that the trust remains intact.
It is also advisable to plan the workflow so that there is no future confusion. Make notes of all
of these meetings and ensure both of you to sign the ‘minutes of the meeting’. Rest assured that checklist such as above will ensure that one sibling does not try to get the better of the other.

Share this article