Black eye for mixing family and business

by WOHe

I ran into a former colleague today at the airport. The last time I saw him – which was, again, at an airport – he and his wife were at the beginning stages of building their first home. He was, as expected, excited about the process.

As we walked through the security line I asked him how his house was. A funny smile came across his face, and without him saying a word I knew it was bad news. He then told me that he hasn’t moved in because of all the liens against the house. It turns out the builder – who was his wife’s cousin – wasn’t paying the subcontractors.

He and his wife have been spending all their time, and hundreds of thousands of additional dollars (about 50 percent more than the original budget) negotiating themselves out of lien hell. My former colleague then told me it’s a possibility they might have to sell the house as soon as they’ve removed the final lien to get out from under the financial burden.

After telling him how bad I felt for him and his wife, I asked, “So, what’s the lesson? Never do business with family?†He said, “No. The lesson is never change the way you do business BECAUSE it’s family.â€

So I ask you, what’s the lesson here?
Does my former colleague have it correct?
Do I have it correct?
Or are there more than one lesson to be learned from a story like this?
Would this have happened if the builder’s clients were total strangers?
Was there no way to avoid this situation?
What are your rules for doing business with family or friends?

Let me know by sending me an e-mail. Or, scroll up to the first paragraph of this blog entry, look to the right and click where you see, “Leave a comment†or “Post or view comments.â€

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