Coming from a corporate background, I love working with family businesses for many reasons, but I think the main reason is that there is a complete emotional and financial investment in ensuring the success of the business to ensure the prosperity of the family and leave a legacy for future generations or divest. It’s the same across the country, extremely hard working families that have a vision of what’s possible, with many speed bumps and some major challenges along the pathway to financial success and freedom. It takes time, but it is amazingly rewarding if you hang in there and follow the recipe.
Future Market Conditions and Opportunities
While there is still a significant level of uncertainty around global supply chains, and this uncertainty will be with us for some time, we need to take a longer term view of the economy and the opportunities it presents. Certainly, mid last year was the time for most businesses to buckle down because no-one had a clue what lay ahead, and there was plenty of disruption.
Fast forward 12 months and we now have a significantly better view of the path forward, with many opportunities presenting themselves to those businesses in manufacturing, agriculture, construction, and other sectors that can deliver real differentiable value to their clients.
Firstly the number and value of major infrastructure projects has never been greater. For example, the Australian Government is investing $110 billion over 10 years from 2020-21 in transport infrastructure across Australia through its rolling infrastructure plan, of which a substantial component is under the Infrastructure Investment Program. Along with major projects to stimulate jobs, we have and will have for a number of years a low interest environment creating opportunities to borrow capital for business expansion. Wage growth is also expected to remain on average at sub 2% for the next two years, and we have an international COVID-19 vaccine roll-out in progress, although with some challenges.
Invest in Your Future Now
So I am positive and optimistic about the future, and certainly there is a recent substantial spring in enquiry levels for most of our manufacturing clients. The question is, how to capitalise on the opportunities? Assuming you have sufficient demand, access to capital, and the desire to work hard and win, then this is where sound strategy formulation, strategy implementation, risk management, financial management and effective leadership intersect.
Don’t wing it or leave your prosperity to chance. Have a clear one page strategic plan and a sound methodology for executing your functional level strategies brilliantly. If you haven’t already, create a management or leadership team and start pushing responsibility down the line. Make sure they are a cohesive team of A graders who meet regularly with a structured agenda and are clear on the vision, desired culture, and strategic plan. You won’t be able to scale your business without this team. Don’t rely solely on family. Depending on your size, run a family board using external advisors, but ensure you run a carefully selected management/leadership team as well.
Make sure that every key decision is made by using profitability, cash flow and ROCE as the pivot point. That will ensure you are managing the downside risk. Have a ‘profit and cash flow first’ focus, not a ‘sales or revenue first’ focus.
Work hard on your leadership ability and the leadership ability and cohesiveness of your management team. Your primary role as the leader is to develop those people around you. Make this your focus and align them to the vision so they come in behind you. Great things are then possible.
Home Time versus Work Time
In family businesses, it can be very challenging to leave work conversations at work and home conversations at home but if you cherish a normal family life without the stress of work-related issues then it is important, otherwise business can be all-consuming. Having a work-life balance includes good fitness levels, relaxation techniques, and diet. Think of it like a corporate business. Leave the building and leave work discussions there as well.
Hold the whole family accountable to keeping family and business time separate. If it’s important to keep other family members abreast of what’s happening in the business, then I would rather you hold a regular short family business meeting, perhaps once a week, fortnight, or month, again with a structured agenda.
Roles and Responsibilities and Hard Conversations
One of the greatest challenges of rapidly growing businesses is managing the workforce; what roles do you need, who do you get to fill them, and when. This is one of those decision areas that can have considerable financial impact if you get in wrong! And it is usually challenging and time consuming. I like to employ two overarching strategies to make it easier. The first is recruit based on your desired labour ratio (as a percent of future forecasted revenue) both for direct labour and fixed labour. Ensure efficiency of existing personnel is maximised first. Secondly, keep the workforce roles as fluid as possible, think of it like a chessboard and review it at least quarterly, giving people greater or different responsibilities as required by the business.
For family members, make sure that everyone is crystal clear on their responsibilities, including what they are not responsible for. Accountability is a key issue in family business. Hold family employees accountable to their role and responsibilities in the same manner you would non-family employees. This applies to the Directors and General Manager as well. Remunerate the position not the person. Family employees should be paid on merit and the value they bring to the business, not on their surname. If some family members wish to earn more, they can learn how to add more value.
Pick the right time and place for hard conversations with family members but do have them (at work). Don’t bicker in front of staff as it looks unprofessional and quickly destroys the desired ‘united front’ culture. The monthly board meeting is a good place for these conversation types. This format helps with emotion control, particularly if using an outside chairperson.
Commit to Change!
The economy is on the move and now is the time to structure your business accordingly to capitalise on the opportunities that present themselves over the next 5 – 10 years. Commit to change and continuous improvement and prosper.