The Family Business
Over the last few years, we have had the opportunity to work with a wide range of family businesses. As students of formal business education, we have had to learn to adapt to the family business environment because it differs from that which is associated with Corporate America. From that experience,there are a number of ideas which we would like to share:
Three Exit Strategies
The first strategy in an ideal world, we live forever and retire to have one of our offspring take over the business which we have built. Of course, we live in a more realistic world and encounter many obstacles along the way. Let’s consider some of those obstacles.
It would be nice to think that you son or daughter will carry on the business and support you in your retirement. Sometime that works. The Yuengling Brewery was established in 1829 in Pottsville PA by a German immigrant David Yuengling. Over the many years, the business grew and prospered and was primarily managed by the men of the family. Today Richard Yuengling Jr. is the current owner and preparing for the next generation, his four daughters. This is an extreme example of the offsprings continuing a business, but the beer market over the long term is somewhat constant.
Often those who grow up in a business find that their passion is somewhere else. It is not true that a parent’s passion in the world of business is passed on. In some cases if that might be true, it cannot be counted on. In some cases the interest may exist, but the ability to manage and lead are lacking.
A second exit strategy is to bring a professional manager into the company to manage it. In this case the family members may be involved in operations but their primary role is that of an owner or major stake holder. This option is only feasible if the firm is large enough and profitable enough to support the compensation of professional managers.
The third exit strategy is to find a buyer. Staging a business for sale is a process which requires some planning. A potential buyer will consider the status of the financial reports, the quality of the customer list, the status of capital assets, and their ability to manage the business. In some cases, they may conclude that the success of the business in not a function of a strong leadership team, but solely based on your person’s involvement. A good situation is selling to a competitor who understands the market and the business.
Invite Others to Join the Team
In many cases, the business is a family project and others are treated as workers. I am aware of a family business, who when they attend an affair, will have separate tables for the family and the staff. How would you feel as a staff member?
Is your business going to be limited by the size and skills of the family? The addition of non-family key planners may be inevitable. Make them feel that they are as important as family members and be inclusive. When this occurs, staff will repay that loyalty and with a long term commitment to the business.
Manage Using the Best Business Practices
In his book Traction-Get a Grip on Your Business, Gino Wickman discussed the necessary steps for building a sustainable business. They include:
- Having a Vision for where the business is going
- Having reliable data for your business performance and even a scorecard.
- Document key processes to insure reliability and continuity
- Be sure that you have the right people in the right seats
- Develop goals and accountability
- Develop communication with regular meetings during which issues can be resolved.
These are all important factors for building a sustainable business, but many run the family business through instinct and being sure there are adequate funds in the checkbook to make payroll. Once a leadership team is established, there needs to be regular meetings to discuss financial results and issues. They need to develop goals and be accountable for their achievement. Everyone needs to understand the vision and the planning by which it will be achieved. Everyone needs to understand that their personal and financial success is tied to that of the company. The team members need to understand that their roles and responsibilities go beyond their individual responsibilities.