Adapting best practice from big-business

Often the key aspects that have made a family business successful need review as the business grows.

Initially strong determination, the ability to seize on opportunities, focus on revenue, an ‘I-do-it-all’ management approach gets things started. However, going forward, these strengths without structure, planning and effective delegation can limit growth and erode value.

Agility - While the greatest benefit a small family business has over its competitors is the ability to adapt and seize opportunities quickly.

However, often the small business has limited capital and may be lacking the capacity to identify and quantify the long-term impact of these decisions.

Plan. Put the ideas, concepts on paper. Paper is more cost effective than “learns” that cost time and money. And if you do proceed, measure the impact against your plan.

Revenue Centric – Often, the focus is on sales, and there is a struggle to differentiate the flow from revenue to net worth. The temporary excitement of high-growth, high-risk opportunities may compromise long-term value building for the family owners.

Understand your business drivers, what levers can you control and move? Develop and promote financial literacy throughout the business. Understand the impact of a sale, i.e. cost of carrying stock, time for debtors to pay, cash  available, overheads and cost of finance.

Domineering Leadership – Being an entrepreneur, forming a business, and becoming successful is a significant feat requiring drive, determination, and self—belief. It can also lead to the belief that the business is unique and the only person who understands is the founder.

Involve others early, look and develop any element of leadership in the oncoming generation – mentor, give responsibility and hold to account. 

Governance – Initially the founder is actively involved in the family business in every area and this is copied and improved, however as more people are involved without guidance and structure the core values can be lost.

A sound management structure with outside advisory, appropriate documented processes and agreements for key areas of your business will ensure that there is clarity and checks across the whole business.