When Sister Is Your Business Partner
As sisters growing up in Rochester, Mich., Brenda and Mary Maher shared a bedroom and a Hasbro (HAS) Easy-Bake oven. As college students, they shared a passion for baking elaborately decorated cakes. And since 2000, the Maher sisters, now 37 and 39 respectively, have shared a thriving Chicago-based business, Cakegirls, which sells some $300,000 worth of specialty cakes a year. Though they have perfected their ability to craft scale replicas of such cultural artifacts as Wrigley Field and the Sony (SNE) PlayStation—sold to celebrity clients, including Bono and Jim Carrey—and they appear on WE tv's Amazing Wedding Cakes and the Food Network's Last Cake Standing, their biggest business accomplishment to date is their nine-year-old partnership.
While every partnership is fraught with risk, those between siblings are even dicier because of the preexisting personal dynamic that almost always characterizes ties between close family members. Bill Alexander, a professor at the Wharton School who specializes in family businesses, explains that "lifelong relationships unconsciously get carried into these partnerships." At the same time, defining business roles and putting them into practice is tricky. And resolving disagreements—or trying to—can be tinged by decades-old family patterns. Wayne Rivers, president of Family Business Institute in Raleigh, N.C., an advisory firm for family-owned companies, says: "Siblings are more hesitant to sign documents. Siblings often go in with blind trust; you're my sister I trust you"—often thinking family ties will bind their business relationship.
According to the Family Firm Institute, a research group in Boston, only 30% of family-owned businesses make it to the second generation, 10% to the third generation, and 3% to the fourth. While Rivers notes that there are no reliable statistics on the number of business partnerships comprised of siblings, he says it is rising among the businesses he works with. "Ten years ago, 25% of family businesses were partnerships. I would say [the number] is substantially larger today."
After three years of toil, a break
Unlike their genre-busting cakes, the Mahers started off cautiously, holding down day jobs while they figured out their fledgling business concept. In 1998, Brenda moved to Chicago by herself and worked as an administrative assistant for a staffing company with the goal of gaining business skills and locating a viable market. "I don't like to be one-dimensional. It allowed me to get my feet wet in Chicago and learn a variety of skills," she says. By the time Mary came to Chicago (with a full set of professional baking and kitchen equipment) two years later—she had been working at an upscale Detroit-area bakery&—a sense of the business and the roles they would play had emerged. Brenda took the lead role in business and Mary focused on the creative side of cake baking and decorating. The Cakegirls got the word out themselves, telling friends and co-workers about their "night job" in the kitchen.
In the beginning, the sisters lived and worked in the same apartment. They gave prospective customers the impression they had a much bigger operation by using voice mail and posting their catalog online. They also opened a business bank account with $500 and deposited any money they earned from baking into it. Within three years, the Mahers had saved $15,000 from sales, having continued to survived on the income from their day jobs.
"I think it is a mistake people make when they blend their expenses together," says Brenda. "We wanted to get a sense over time how much money we could save just on making the cakes out of the apartment." Word spread about their sculptural confections. When Chicago magazine ran a feature on them in 2003, orders flooded in, prompting Brenda to buy a minivan for deliveries. The Mahers felt they were at a crucial point: The business needed a full-time commitment to take advantage of the momentum and sustain itself.
Again, Brenda moved first, cutting back her hours as an administrative assistant. "It was scary. We couldn't get a loan. But I knew if I had more time to devote to the business, we could grow it," she says. The sisters worked out an arrangement in which Brenda worked during the days doing the administrative details and baking. When Mary arrived in the evening, after putting in time as a nanny and as a bookseller at Barnes & Noble (BKS), she did the decorating.
full-time, professional commitments
Although Brenda enjoyed decorating, she was pragmatic. "Mary is 100 times a better decorator than I am and I knew that if I didn't answer the phones and create a structure for the business, it wasn't going to happen."
Their personalities influenced the evolution of the business, too. "I'm more of the mind, if it flops it flops, and Mary is more get-your-ducks-in-a-row," says Brenda. She pushed for a professional space instead of their apartment. Mary waffled at first but the pair eventually signed a six-month lease on a former bakery close to Wrigley Field. It cost an initial $5,000 for the security deposit—a third of what they had saved in three years. Convinced that the business needed her to devote more time to it to succeed, Mary also quit her day jobs. The sisters say the gamble gave Mary the opportunity to experiment with cakes and decorating techniques that would bring the business acclaim.
Until the sisters signed the lease, they had nothing in writing that signaled a formal business partnership. But shortly after signing the lease, they incorporated the business to protect themselves from liability. Like many sibling partnerships, the Mahers consider themselves equal partners and earn identical salaries. Staying true to character, they maintained a sense of humor when assigning their titles. When elder sister Mary filled out the paperwork, she listed herself as president and made Brenda secretary. "Just to get under her skin," jokes Mary.
"The baby of the family" says "no"
The pair say their biggest arguments and struggles often reflect the pecking order established in their childhoods. "I tend to be more black-and-white," says Brenda, "and she is more grey." Brenda says that Mary is very literal and spends a huge amount of time making sure each cake is done to perfection. Says Brenda: "What we fight about most is probably about her saying I charge too much and me saying she takes too long. I say she's adding too many details and she says that's a lot of money."
For instance, not long ago, Brenda decided to stop taking on projects she deemed unprofitable. "We were saying yes to everything and Brenda stopped that," says Mary. "She said: 'Now we have to learn to say no in order to improve the business.' I think that has to do with her being the baby of the family. She wants to prove herself."
Their relationship as sisters does lead to a bit of bickering. "To some degree when we fight, we resort back to who we are as siblings, even though we are talking about business-related things," says Mary. At the same time, they watch out for each other. "We're more like two squirrels," says Brenda. "Neither of us wants to leave early and leave the other one there. We look out for each other. If I see she's getting burnt-out, I say take a day off, and she does the same."
Family business experts Alexander and Rivers agree that one of the biggest challenges in making a sibling business partnership last involves delineating the business relationship and family relationship—both of which tend to overlap. The Mahers say one lesson from their early years—when they both lived and worked together—is the need for space. The pair say they rarely spend time together outside of work these days. (Mary is married, with a young son; Brenda is single).
In the end, the Mahers say that what makes their partnership risky also instills a sense of commitment that's lacking among most business partners. "There is a big difference about working with siblings," says Mary. "I've watched friends who ran small businesses build up a lot of animosity. [Then] they have some disagreement and they sue the other. That is shocking to me. We have a silent agreement. If I don't want to be part of this business, I can't screw over my sister in the process no matter how ugly it gets."