Two relatives as partners

The only thing worse than a friend for a partner is a relative. I was warned against it and ignored the advice. I paid dearly. I would never do it again.

You should be evaluating each partner on their own merits. It's great if your partner can find you another who is worthy, but you should determine on your own whether or not you want the third wheel.

This should also be a warning to you about working with this partner. You have not yet committed to him, and he's making possibly unreasonable demands of the business.

In regard to control, you don't have to split the company equally between the partners. It's your company alone initially, and then you make an offer to the partner. You can offer 10%. Or 50%. Or 90%. It's up to you to make the offer, and up to your potential partner to decide whether or not to accept it.

Proceed carefully and cautiously. The only reason to bring anyone into your company as a participating equity partner is for the value they bring to the table. Do these people bring as much skill and talent to the table as you do? Why should they be entitled to equal shares in your start-up.

If you were to bring both brothers into the company with equal shares, you immediately become the minority partner and the "family" is the majority owner.

I have had personal experience with this. In fact, continue to do so as my own relative is currently 'dead wood' in a startup I am trying to launch.

My advice on this would be simply don't do it. It helps not having your own relatives in so you do not lose a relationship and it also helps avoid any nasty situation where a relationship between the other partners does not backfire onto you. The existence of a familial relationship tends to sometimes also portray the wrong impression - that complacency is ok, which it is NOT in a startup serious about succeeding.

I was warned about the issues that arise when you do business with family and friends early on as well. I wrote a pretty detailed blog post about this that covers 5 major concerns that you should take into account when doing business with friends or family:

• Business Plan Development: Never fall into the trap of getting started with ‘just’ a business idea. Sure you have a greater level of trust with your business partner but that does not mean you would exclude putting down on paper what it is that you plan on achieving through this business. The process of putting down on paper what your idea is, clarifies it, identifies key areas which you need to work on and possible pitfalls you may face. This is a step which needs to be taken before you start any venture.

• Commitment Levels: With a business plan in place you will now be able to judge with greater certainty how much money, time and effort is going to be required by the business. You need to put down clear parameters at this stage as to what each partner is supposed to do. This level of commitment needs to be clarified from the start or you will have an unbalanced partnership which leads to a multitude of problems further down the line.

• Candor: Establish a culture where candour needs to be an integral part of the venture. The worst thing you can do for yourself and your business would be to keep all the things you want to say to yourself. This will lead to frustration, under performance and morale issues which can jeopardize the success of the business. A culture where you can be open, state your opinions and be comfortable will help you form a considerable competitive advantage and will enable your company to make difficult decisions with a lot more ease.

• Noise Levels: When you set to do business with friends/family you need to keep external noise levels under strict controls. Noise levels refers to the interference in the business by members of your family or friends. When we divulge too much information outside the core group it ultimately comes back to the core group in a completely changed form. This could lead to several problems between partners, frustrate the team and affect the overall morale.

• Equity Splits: This is an issue which is at the core of most problems which are faced by all companies but more so in businesses where friends and family are involved. We tend to be a lot more generous just because a business partner is a cousin, friend or relative. You need to correctly assess what the partners contribution will be and then use a simple model to figure out how much the partners stake is actually worth.

To read more about each point please go to 5 Steps to Follow When Doing Business with Family or Friends.

The fact that you are not comfortable right now and you are asking for advice should be enough reason for you not to do this. Follow your gut.