The family business – the next 10 years

Posted: September 23, 2013 in Business startup, Family Businesses

As I stated in my previous post, the first five years are the hardest in the chronology of a family business – any business for that matter! The new business is trying to create a name for itself ( develop goodwill) in its market. The proof will be – the bottom line. Is it profitable? When? Can the profits be duplicated and sustained?

The next 10 years may be the years where the most growth occurs and possibly the years where the scion of the small business feels most stressed. Growth is a good thing but ancillary issues arise:

  • Growth necessitates more office or production space.
  • Growth requires more staff.
  • More staff can result in more headaches if the right staff aren’t hired.
  • Growth necessitates better management. Specific skill sets (ie: marketing and selling, operations, finance, technical, IT etc.)
  • A serious review of the organization structure should be on the agenda.
  • Oh yes… lest I forget .. growth means having the resources (cash flow and financing sources) to handle the growth.

I am excluding the family business that remains relatively stable and whose size (or staff) doesn’t change. Maybe, in the long run, this types of family business wins the tortoise vs the hare marathon?

Growth is the desired outcome for family business owners. It builds a legacy and creates an opportunity for family members to join “the firm.” It can be improperly managed and can create a lot of problems later on. The six bullets above underscore a failing that many family business owners fall prey to” Micro-management.”

Micro-management is understandable given the genesis of the family business itself. Two spouses doing the lions share of the work and trying to do the lions share of the work even as the business expands beyond their capabilities or beyond a typical small business work week – closer to 60 hours per week vs 35-40 everywhere else.

There should be a segregation between strategic and operational management.  In a family business there isn’t. Marketing and business development are put on the back burner because the business has more work than it can handle.  Supervising staff becomes the game plan.  It is not surprising to me but most small business owners don’t have written job descriptions for key staff. It’s simply a matter of: .. do what I say.

This type of management is not strategic. The focus is short term. I have been involved in many family businesses with this management style. It is called crisis management.

Into this inner management sanctum comes the next generation.

 

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