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Creating a successful start-up introduces many challenges and it can be even more complex when building a business with family. Some family relationships can have an easy transition into a healthy business relationship, while others can be fraught with conflict. Rand Fishkin, founder of Sparktoro and author of "Lost and Founder", shares his perspective on working with loved ones to ensure healthy relationships inside the business as well as at home. Having started a business with his mother, Rand gives insight into the dynamics between family members within a business, highlighting the major pitfalls and ways to avoid them.
Interview transcript below:
Banu
I think a start-up's life-cycle has so many changes, everything is in flux.
Rand
Absolutely, and people change too.
Banu
Definitely. I think the start of the start-up period serves as a honeymoon phase and then when you're growing the challenges are different, the relationship has to evolve at the same time. Can you tell me more about how you dealt with that? For instance when there was a change happening, or one person was not feeling aligned, or both people are not feeling aligned and one person was maybe more frustrated. How did you communicate that? How did you address that issue?
Rand
Not well.
Banu
Not well?
Rand
No, I don't think so. So my co-founder on Moz was my mom, Gillian.
Banu
I wanted to bring that up because that's something we don't really see very often. Tell me a little more also about that. How does that work, being co-founders with your mom?
Rand
I think mom and son is probably the least common start-up combination. I think that's very, very unusual. And that being said, I've talked to a lot of people who have started businesses with family members: parents, children, siblings, spouses. And I think that there is universally a lot of complexity around mixing those kinds of relationships and trying to make a business work with someone with whom you have a longstanding personal relationship. It can be good, there's definitely wonderful things that are part of it but there's also really hard things. I would say most of the people that I have spoken to, who have built companies with family members, have said that over the course of time they've come to have a lot of challenges with that. Many of them have said that they've regretted it and they wouldn't recommend it or do it again and that it's hard.
Banu
That's what they said?
Rand
Yeah and I would agree with them. I think that's a really, really hard position to be in. The one exception to that, and it's not universal, but most of the people who talk to me, and this is anecdotal, but who have formed a company with their spouse or their significant other, like a long term committed marriage type of relationship, those tend to go better, which surprised me.
Banu
That's interesting.
Rand
Yeah, it seems like a lot of people can make those types of businesses work. That's not to say it's universal, there are definitely people who have challenges with that, but I think that perhaps there's more of that partnership element already existing. In a marriage, you make sacrifices for the other person and you're accustomed to that. You have a style where you're accustomed to trying to take on challenges together; one person's in the driver's seat sometimes and they take the back seat other times. I think with family that's not generally true.
Banu
So when you were starting this company and had a different co-founder, this time with another family member, how did you get prepared mentally for that? Did you have anything that you wanted to achieve in that relationship or make sure that you want to start the co-founder relationship a certain way? Did you have anything like that?
Rand
Yeah, absolutely. So Casey and I, I think we probably met somewhere between half a dozen and a dozen times before we started Sparktoro together and we discussed our working styles; what kinds of companies we wanted to build and what we didn't want to build; how things are and how things might change; what we would do whether we were successful or if we struggled. We had both been through a number of journeys, some together and some at different companies, but I think that was really, really helpful to know to have those conversations up front and to say, hey, here's a bunch of different scenarios that could happen. And even though these are all very unlikely, let's plan for how we want to be and and what we want to do in these scenarios. For example, I told Casey that after my experience at Moz, I don't like to put my foot down and be 'the heavy' and those sorts of things, but I also knew that I would not be comfortable not being CEO. I was not comfortable not being able to be 100% in charge or having full ownership of the company and deciding the direction and that sort of thing, and Casey said, "I'm comfortable with that and I trust you. Let's put a structure in place so that if you get so frustrated with me that you fire me, here's what that looks like". We had that conversation right upfront, so we both know what that looks like, if it if it should come to pass and, knock on wood, if it never will.
Banu
So you really discussed everything?
Rand
I think that by having those hard conversations before they happen, as opposed to when they happen, you take away a lot of uncertainty and you remove a lot of the emotion and you can have them in a much healthier place. So that's certainly something I recommend to every founder, every co-founder.
Banu
Okay, and what were the structures that you put in place? Can you provide one scenario that was prepared for in case one person has to leave?
Rand
Yeah. So I think one of the ones that I recall pretty well, and I'll have to double check our documents to be sure that this is the case, but we have a structure in place in case one of us decides that we need to leave the company for personal reasons, or medical reasons or we need to take care of family - if one of our partners gets sick and needs care, those kinds of things. We discussed what that looks like in terms of how equity goes and we have a structure where it basically says this sum of founding equity will always be with you, but the rest of it is sacrificed after a certain number of years and how that will work. So, for example, if in a year or two, I walk away from the business and Casey's left on his own, it's not like, "Oh no, old Rand owns fifty five percent of this thing, what what do I do? You know, I don't even have control over this." And so instead it's something more like, "OK, if I walk away after the first year, I only have 15 percent". The rest can be distributed as Casey sees fit to help him recruit a new CEO or bring in a new co-founder for the project. Those kinds of things.
Banu
OK, very good. I think it's very helpful because when you're discussing it at the beginning, you hope that it's never going to happen. So they're not really hard emotions. It's very difficult to have those conversations when it's really happening.
Rand
Yeah, I think you can surprisingly be a lot more logical and thoughtful about it. And then it's probably not the case that exactly the thing you planned for will ever happen. But something will. The structure you set up, that plan for those eventualities, will help guide you and help both of you or all of you in the case of many founders, to know what that looks like.
Banu
Awesome. In your blog post, you also talked about disagree and commit and why it is problematic. Can you tell us a bit more about that?
Rand
Sure. I know that it is very popular, especially in executive teams, but I don't like it. I have not found it to be something that works well consistently. And I think that is because when people...
Banu
Before we get any deeper into that, can you explain what you mean by disagree and commit?
Rand
Oh, sure. So let's say you and I, and the rest of our executive team, are all part of a company and we have a meeting where we decide our new product roadmap, what we're going to build for 2019. And I'm the CEO and so I make the decision that we're going to do X and you think it's a bad idea. You argue against it, you bring up some compelling points and I overrule those points and say, "We're doing it anyway. I need you to disagree with me, but commit to this this path anyway." My experience is that that is a very popular way of closing down the rest of the conversation and just saying, "Hey, we're doing the thing that I said we're doing". My experience has been that people almost universally can't put in their best work. They don't put in their best work when they truly, fundamentally disagree, or when they feel like their objections have not been addressed, and they feel like those objections have merit and were overruled because of the person in charge. This is as opposed to the mindset that [the person in charge] has superb high quality arguments that maybe I still don't necessarily agree with, but I can see the perspective and so I think I can get behind this thing.
Banu
So what do you do instead?
Rand
I prefer to take the time. I prefer to take the time to fight and argue and push through it and to listen to those concerns. If it comes to a point where it's more than a difference of opinion, where there's a fundamental belief that X is not going to work because of A, B and C, and there's no reasonable sort of recourse, there's no reasonable way to solve for A, B and C, I think you should go solve for it before you make the decision. I think you should actually go invest that time, especially as things get bigger and more complex. I think when you're very small, what you can say is that you don't really have time and energy to do multiple things, so you've got to take a best guess and then you're going to know by this date if it doesn't work and then move on to the next idea. I think that approach can also work fine, but establishing those parameters and structures works well too. I've been guilty of it on both sides by the way, I've been guilty of railroading my team and saying, "No, we're doing it this way despite your objections" and I've been on the other side of that where I have been the person complaining loudly in the room, "Hey, I don't understand why we're going this direction. This doesn't make any sense to me. I strongly disagree with it. I feel like my objections are being heard, but not addressed." I find many executives will say they want you to share your objective, your objections or your problems, and then you share them, but they don't listen. They are hearing them, but not listening to them and that's a big difference.
Banu
Great point, because I think, in my experience, what makes a difference is being heard - if the person is disagreeing and they feel like you listen and you understand what they're talking about. Usually the CEO is the one going, "Okay, you disagree, but this is what we're doing" and people understand that they have a bigger vantage point, so they are aware of other things that they may not be aware of, when making a decision, but I think the difference is the feeling of being heard or not. If I feel like you're brushing me off, then I think it creates those frustrations and then the person is really not committing. If I believe you really understand what I'm trying to tell you and warn you about, then they respect their CEO and they feel heard, thinking: "He really understood what I'm saying, but he's still making this decision. Maybe there's something that I'm not seeing because I'm not looking at it from all perspectives and different perspectives in a decision."
Rand
Well, I have seen that be problematic as well. I would urge folks to go one step further, which is don't just say tell me your objections and then say, "Okay, I've heard your objections and I think they have some substance but we're going to do this this way anyway". That is not good enough. Don't stop there. Say, "I heard your objections and I dug in and here are my points of disagreement" or "Here's why I believe those things won't stop us from being successful in this goal that we agree is the ultimate goal. And here's how we're going to check to make sure that those things aren't the case" or "gosh, I don't have an answer to this one. So that concerns me since I don't have a good answer to it, before we make the decision, we're going to go get a good answer to it". That shows that you're not just hearing the objections, but that you are combining forces to solve them before you overrule them.
Banu
I think that's how you create synergy.
Rand
I think when you have those those tough scenarios this is more true for later stage than for early stage. I think early stage is a lot of needing to move fast and be nimble and your decisions don't carry that much weight because this thing is going to be wrong, that things can be wrong. It's very different. When you get to those middle stages, and we had this a ton at Moz, it was when we were between probably 20 and 50 million dollars in recurring revenue annually, I think those fights are really, really worth having because the difference can mean plateau versus continued growth.
Banu
Awesome. Thank you very much. This was great.