The current economic environment is challenging for businesses trying to operate when budgets are tighter and profit margins are squeezed.
Family businesses are uniquely positioned as they’re used to maintaining a long-term perspective, naturally fostering a transgenerational mindset through knowledge sharing, learning and investment in the business. As a result of this approach, family businesses become resilient and expect disruption.
So, what qualities and behaviours make family businesses resilient, and how can they push through times of economic strain?
Reasons family businesses are resilient
- Commitment: Often, a family business has started from a passion, where the founders have invested a considerable amount of effort and resources into making it successful. Because of this passion and commitment, they want to ensure the business continues even when they’re met with challenges.
- Responsibility: Family businesses often feel a strong sense of responsibility for the business, its staff and their community. Business success is based on the well-being of all stakeholders involved.
- Family values: Core values of honesty and integrity drive business practices. A strong moral compass usually means they strive to pay suppliers on time and ensure strong communication amongst their stakeholders.
- Unique: Sometimes family businesses can be unique in how they approach their operations, deviating from best practice in many accounting textbooks and showcasing their approaches can work.
- Inventory management: Sometimes family businesses hold what is considered excess stock, and that is because they don’t want to disappoint customers by not having an item to buy.
- Cash at bank: Family businesses often take a conservative approach, prioritising cash. This creates safety when they’re faced with an unexpected expense in the business.
- Agility: Family businesses are agile and can make decisions quickly, allowing for rapid implementation of new strategies and ideas.
- Family unity: The strength of the family and their values usually provides support during tough times and helps foster a resilient business environment. They are skilled at balancing professional objectives with personal values.
Can you build family resilience without family unity?
Family unity doesn’t mean family members won’t disagree from time to time, but they should align with the same vision. This builds trust and unleashes positive energy in a family business.
What we often find is when a family business is started, the founders are usually the parents, holding a mutual objective of wanting the best for their family. Once the children are old enough to join the business, individual aspirations can create challenges within the family unit. Focus on the business strategy can be lost, which is why only 12 per cent of family business make it to third generation.
To maintain family unity, a governance structure should be established the moment more than one generation begins working in the business. Effective family governance ensures the business has an aligned vision and communication remains open when decisions need to be made. It provides a guidebook or structure for when you reach a crossroads.
We’re here to help
Our team can assist your family business with ensuring governance frameworks are in place. These frameworks ensure you have clearly defined procedures for how you run your business, underpinning how good decisions are made. If you’d like any help with your family business, please reach out to your Family Business Consulting representative today.
Learn more about how our Family business consulting services can help you
